6-K

Cameco Corporation

2121-11th Street West

Saskatoon, Saskatchewan

S7M 1J3

cameco.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

For the month of April, 2016

Cameco Corporation

(Commission file No. 1-14228)

2121-11th Street West

Saskatoon, Saskatchewan, Canada S7M 1J3

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ¨ Form 40-F x

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

Exhibit Index


Exhibit No.	Description	Page No.

99.1	Notice of 2016 Annual Meeting of Shareholders

99.2	Cameco Corporation Management Proxy Circular

99.3	Cameco Corporation Proxy Form

99.4	Cameco Corporation 2015 Annual Report

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: April 7, 2016						Cameco Corporation
						By:

						“Sean A. Quinn”
						Sean A. Quinn
						Senior Vice-President, Chief Legal Officer and Corporate Secretary

Page 2

EX-99.1

Exhibit 99.1

LOGO

Notice of our 2016 annual meeting of shareholders

You are invited to our 2016 annual meeting:

When

Wednesday, May 11, 2016

8:30 a.m. CST

Where

Cameco Corporation

2121 - 11th Street West

Saskatoon, Saskatchewan

We will webcast the meeting on our website at cameco.com.

Your vote is important

If you held Cameco common shares on March 14, 2016, you are entitled to receive notice of and to vote at this meeting.

You can vote in person at the meeting or by proxy.

See pages 5 through 9 of the attached management proxy circular for information about what the meeting will cover, who can vote and how to vote.

By order of the board of directors,

LOGO

Sean Quinn

Senior Vice-President,

Chief Legal Officer and Corporate Secretary

Saskatoon, Saskatchewan

April 7, 2016


				FOR MORE INFORMATION
				FOR MORE INFORMATION
				Read about the business of the meeting beginning on page 5 of the attached management proxy circular.
				The deadline for submitting a shareholder proposal for our 2017 annual meeting is January 9, 2017 and we require advance notice for nominating directors (see page 91 for details).
				Access our 2015 annual report and other documents and information online:
				· cameco.com
				· sedar.com (SEDAR)
				· sec.gov/edgar.shtml (EDGAR)
				See page 91 for more information.


				TOTAL COMMON SHARES OUTSTANDING
				TOTAL COMMON SHARES OUTSTANDING
				395,792,522		December 31, 2015
				395,792,522		March 8, 2016
				CST Trust Company is our transfer agent and registrar (see page 9 for details).

EX-99.2

Exhibit 99.2

LOGO

Management Proxy Circular
Notice of
Annual Meeting of Shareholders
to be held May 11, 2016 On track

Cameco is one of the world’s largest uranium producers, accounting for about 18% of the world’s production in 2015.

We also supply much of the world’s reactor fleet with the fuel to generate one of the cleanest sources of electricity available today.

You have received this document because you are a Cameco shareholder and are entitled to vote at our 2016 annual meeting of shareholders. Please remember to vote.

What’s inside

Letter to shareholders

Notice of our 2016 annual meeting

Management proxy circular

Business of the meeting

About voting

About the nominated directors

Governance at Cameco

Our shareholder commitment

Governance principles

About the board

Board committees

Compensation

Compensation governance

Director compensation

Executive compensation

Other information

Appendixes


		Cameco is widely recognized for excellence in corporate governance and best practices in building and sustaining shareholder value
		●		honourable mention for corporate disclosure, 2015 CPA Canada Awards of Excellence in Corporate Reporting
		●		winner of the inaugural 2015 Achievement in Private Sector Risk Management (Mastering Risk) award for excellence in Canadian risk, control and audit management practices
		●		winner of the 2015 Excellence in Governance Award for Best sustainability, ethics and environmental governance program by the Canadian Society of Corporate Secretaries
		●		winner of the 2014 New York Stock Exchange inaugural leadership award for exemplary CD&A disclosure by a compensation committee
		●		past winner of the Canadian Coalition for Good Governance’s governance gavel awards for best disclosure for approach to executive compensation and for best disclosure of board governance practices and director qualifications for governance

Letter to shareholders

Dear fellow shareholder,

On behalf of Cameco’s board of directors, I am pleased to invite you to the 2016 annual meeting of shareholders. The meeting will be held on May 11, 2016 in Saskatoon, and available to all shareholders by webcast. You can read about each item of business in the management proxy circular, which begins on page 4.

The circular also provides important information about voting, the directors who are standing for election this year, our governance practices and director and executive compensation. The board has worked conscientiously over the past year to oversee Cameco’s affairs and work with management on the company’s strategic direction. Our focus continues to be on achieving steady progress on Cameco’s four measures of success, paying particular attention to strategy and value creation, risk oversight and board governance – areas we see as fundamental to Cameco’s sustainability and future success.

Strategy

We discuss the corporate strategy at every regular board meeting, working with management to ensure that the strategy addresses the near- and medium-term challenges in the nuclear industry and positions Cameco to benefit from the strong demand we anticipate over the long term. We also had two in-depth strategic planning sessions with management in 2015, focusing specifically on Cameco’s tier-one asset strategy, so we can be nimble and take advantage of the market when it turns, and deliver the best value to shareholders.

Risk oversight

Strong risk oversight is also one of our key responsibilities, and includes both strategic risks and the structured enterprise risk management (ERM) program that allocates oversight of certain risks to specific board committees. Management and the board have dedicated a significant amount of time over the last several years to developing and refining the ERM program. We are proud of what we now consider a mature program – one that has earned Cameco recognition as winner of the inaugural 2015 Achievement in Private Sector Risk Management award for excellence in Canadian risk, control and audit management practices.

Sound governance

We review our governance practices regularly to ensure Cameco continues to be well served and remains at the forefront of good governance. The board, committee and director assessments that we conduct every year also help us to improve our own processes and the work we do as Cameco directors. The chair of the nominating, corporate governance and risk committee met individually with each director to review their assessment, capacity and commitment to Cameco’s board.

2015 HIGHLIGHTS

Despite challenging market conditions, Cameco performed well in 2015, exceeding its
production guidance, delivering on its financial guidance and achieving record annual
revenue from its uranium segment.

Annual revenue
of $2.75 billion

Produced 11.3 million lbs (100% basis) of packaged uranium concentrate from ore mined at Cigar Lake

Record average
realized uranium price
of $57.58 ($Cdn)

LETTER TO SHAREHOLDERS 1

Executive compensation

We conduct an in-depth review of executive compensation every three years, and completed a review in 2015. Directors recognize the importance of linking executive pay to both the execution of Cameco’s business plan and our commitment to deliver strong returns to our shareholders. The chair of the human resources and compensation committee reports on the key outcomes of the review and the committee’s response to ensure executive compensation at Cameco continues to be well structured, linked to performance and in alignment with shareholder interests (see page 49). He also gives important insights into the nuclear industry, executive compensation at Cameco and decisions by the committee and board on executive pay for 2015.

Board renewal

Having the right diversity and mix of skills and experience on the board is critical to our ability to carry out our duties and responsibilities effectively. A regular review of our competency and attribute matrices and diversity policy helps ensure that the board’s composition is appropriate and meets Cameco’s needs. We undertook a director search in 2015 that resulted in the appointment of Don Kayne, CEO of Canfor Corporation and Canfor Pulp Products Inc., to the board. Don’s CEO experience and his knowledge of emerging Asian markets brings a unique perspective to our board. We are also in the midst of a search for a female director with appropriate industry experience and other skills. You can read more about the search process on page 30.

Looking ahead

Despite the prolonged weakness in the uranium market and the downward pressure on Cameco’s share price, we remain confident of the long-term prospects for both Cameco and the nuclear industry. The board and management thank you for your continued confidence.

This year, two directors are retiring from the board – Jim Curtiss and Nancy Hopkins. On behalf of the board, I want to thank them for their wisdom, judgment and contributions over many years of service. The board has benefited from Jim’s vast experience in the U.S. nuclear sector and his expertise in executive compensation as chair of the human resources and compensation committee for the last 14 years. Nancy has been instrumental in driving many of Cameco’s strong governance practices. Over the course of her tenure, she has chaired the nominating, corporate governance and risk committee (2009-2016), audit and finance committee (1999-2009) and human resources and compensation committee (1994-1999). We wish them well.

Please take some time to read the attached management proxy circular to decide how you want to vote your shares. Your vote is important.

Sincerely,

LOGO

Neil McMillan

Chair of the board

Cameco Corporation



		VIDEO MESSAGE FROM THE CHAIR
		See the Chair’s video at cameco.com/about/governance


2015 AWARDS
●	Top 100 Employers in Canada (Mediacorp)	●	Canada’s Best Diversity Employers (Mediacorp)

●	Saskatchewan’s Top Employers	●	Canada’s Top Employers for Young People (Mediacorp)

2 CAMECO CORPORATION

LOGO

Notice of our 2016 annual meeting of shareholders

You are invited to our 2016 annual meeting:

When

Wednesday, May 11, 2016

8:30 a.m. CST

Where

Cameco Corporation

2121 - 11th Street West

Saskatoon, Saskatchewan

We will webcast the meeting on our website at cameco.com.

Your vote is important

If you held Cameco common shares on March 14, 2016, you are entitled to receive notice of and to vote at this meeting.

You can vote in person at the meeting or by proxy.

See pages 5 through 9 of the attached management proxy circular for information about what the meeting will cover, who can vote and how to vote.

By order of the board of directors,

LOGO

Sean Quinn

Senior Vice-President,

Chief Legal Officer and Corporate Secretary

Saskatoon, Saskatchewan

April 7, 2016


		FOR MORE INFORMATION
		FOR MORE INFORMATION
		Read about the business of the meeting beginning on page 5 of the attached management proxy circular.
		The deadline for submitting a shareholder proposal for our 2017 annual meeting is January 9, 2017 and we require advance notice for nominating directors (see page 91 for details).
		Access our 2015 annual report and other documents and information online:
		●		cameco.com
		●		sedar.com (SEDAR)
		●		sec.gov/edgar.shtml (EDGAR)
		See page 91 for more information.

NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS 3

LOGO

Management proxy circular

You have received this circular because you owned Cameco common shares on March 14, 2016. Management is soliciting your proxy for our 2016 annual meeting of shareholders.

As a shareholder, you have the right to attend the annual meeting of shareholders on May 11, 2016 and to vote your shares in person or by proxy.

The board of directors has approved the contents of this document and has authorized us to send it to you. We have also sent a copy to each of our directors and to our auditors.

You may have received with this circular a copy of our 2015 annual report (if you requested a copy or one was otherwise required to be sent to you). This information is also available on our website (cameco.com).


		THINGS TO NOTE
		THINGS TO NOTE
		Key terms in this document
		● you and your refer to the shareholder
		● we, us, our and Cameco mean Cameco Corporation
		● shares and Cameco shares mean Cameco’s common shares, unless indicated otherwise
		● all dollar amounts are in Canadian dollars, unless indicated otherwise
		● information is as of March 8, 2016, unless indicated otherwise.
		Your vote is important
		This circular describes what the meeting will cover and how to vote. Please read it carefully and vote, either by completing the form included with this circular or voting in person at the meeting.
		Cameco employees or representatives of Kingsdale Shareholder Services (Kingsdale) may contact you to encourage you to vote. If you have any questions or need more information about voting your shares, call Kingsdale at 1.888.518.1558 (toll free in North America) or 416.867.2272 (collect calls accepted) outside of North America. Or send an email to contactus@kingsdaleshareholder.com.
		We are paying Kingsdale approximately $50,000 for their services.

4 CAMECO CORPORATION

Business of the meeting

We require majority approval on the items of business, except for the election of directors (see Our policy on majority voting on page 10).

WE NEED A QUOROM

1. Elect directors

You will elect 10 directors to our board to serve for a term of one year. Since our last annual meeting, the board appointed one new director to the board and he will stand for election for the first time. The other nine nominated

We can only hold the meeting and transact business if we have a

quorum at the beginning of the meeting – when the people at the

meeting hold, or represent by proxy, at least 25% of our total

common shares issued and outstanding.

directors currently serve on the board. You can vote for all of the nominated directors, vote for some of them and withhold votes for others, or withhold votes for all of them (see page 10).

The director profiles starting on page 11 tell you about each director’s background and experience and membership on Cameco board committees.

We recommend you vote for all of the nominated directors.

2. Reappoint the auditors

You will vote on reappointing the independent auditors. Auditors reinforce the importance of a diligent and transparent financial reporting process. They strengthen investor confidence in our financial reporting.

The board, on the recommendation of the audit and finance committee, has proposed that KPMG LLP (KPMG) be reappointed as our auditors until the end of our next annual meeting. KPMG, or its predecessor firms, have been our auditors since we incorporated. You can vote for reappointing KPMG, or you can withhold your vote.

KPMG provides us with three types of services:

● audit services — generally relate to the audit and review of annual and interim financial statements and notes, conducting the annual audits of affiliates, auditing our internal controls over financial reporting and providing other services that may be required by regulators. These may include services for registration statements, prospectuses, reports and other documents that are filed with securities regulators, or other documents issued for securities offerings.

● audit-related services — include advising on accounting matters, attest services not directly linked to the financial statements that are required by regulators and conducting audits of employee benefit plans.

● tax services — relate to tax compliance and tax advice that are beyond the scope of the annual audit. These include reviewing transfer-pricing documentation and correspondence with tax authorities, preparing corporate tax returns, and advice on international tax matters, tax implications of capital market transactions and capital tax.

The table below shows the fees we paid to KPMG and its affiliates for services in 2014 and 2015. The board has invited a representative of KPMG to attend the meeting.


	2015 ($)		% OF TOTAL FEES (%)		2014 ($)		% OF TOTAL FEES (%)
Audit fees
Cameco		1,939,000		57.3		1,743,300	48.7
Subsidiaries		904,900		26.7		798,900	22.4
Total audit fees		2,843,900		84.0		2,542,200	71.1

Audit-related fees
Translation services¹		–		0.0		178,500	5.0
Pensions and other²		27,300		0.8		177,800	5.0
Total audit-related fees		27,300		0.8		356,300	10.0

Tax fees
Compliance³		150,500		4.5		307,800	8.6
Planning and advice⁴		362,600		10.7		367,400	10.3
Total tax fees		513,100		15.2		675,200	18.9

Total fees		3,384,300		100.0		3,573,700	100.0

2014 fees for translation services relate to French translation of the MD&A for December 2013 and March, June and September 2014.

2014 fees include the audit of Cameco’s pension plans and finance services related to the base shelf prospectus.

Fees were lower in 2015 because of a decrease in fees for subsidiary tax compliance services and the preparation of US tax returns.

Includes fees paid for transfer pricing advisory services.

We recommend you vote for reappointing KPMG as our auditors.

2016 MANAGEMENT PROXY CIRCULAR 5

3. Receive financial statements

Our consolidated financial statements and management’s discussion and analysis (MD&A) for the year ended December 31, 2015 will be presented at the meeting.

You can download a copy of our 2015 annual report (which includes our consolidated financial statements for the year ended December 31, 2015 and the auditors’ report) from our website (cameco.com/invest/financial-information). You received a copy of the annual report if you requested a copy or one was otherwise required to be sent to you.

4. ‘Say on pay’

You will vote on our approach to executive compensation as disclosed in this circular starting on page 59. The board believes this non-binding advisory vote gives shareholders a timely and effective way to provide input to the board and the human resources and compensation committee on this important matter.

Every year the board and the human resources and compensation committee discuss the results and nature of shareholders’ comments as well as the trend in shareholders’ views on our approach to executive compensation. These discussions provided important background and insights for our compensation review in 2015 and our ongoing efforts to encourage dialogue and outreach with shareholders generally (see page 22).

Please take some time to read about our compensation strategy and how we assess performance, the sound decision-making by the board and how we manage compensation risk (see page 53 and pages 59 to 70).

Vote for or against our approach to executive compensation by voting on the following resolution:

Be it resolved that, on an advisory basis and not to diminish the role and responsibilities of the board of directors for executive compensation, the shareholders accept the approach to executive compensation disclosed in Cameco’s management proxy circular delivered in advance of the 2016 annual meeting of shareholders.

We recommend you vote for our approach to executive compensation.

5. Other business

We did not receive any shareholder proposals for this meeting, and are not aware of any other items of business to be considered at the meeting.

If other items of business are properly brought before the meeting, you (or your proxyholder) can vote as you deem appropriate.

ABOUT VOTING RESULTS

We will disclose the voting results on the items of business in our report on the 2016 annual meeting voting results shortly after the meeting.

Go to our website cameco.com/invest/events-presentations/2016-annual-meeting-of-shareholders or sedar.com following the meeting to see voting results.

MORE ABOUT ‘SAY ON PAY’

We have held an advisory vote on ‘say on pay’ every year since we introduced it in 2010. We monitor developments in executive compensation and evolving best practices to make sure our programs and decisions are appropriate. We do a comprehensive risk assessment of our executive compensation program every three years. See page 49 to read about the 2015 compensation review.

You can write to the board or committee chair about your views on executive compensation (see page 22 for details).

QUESTIONS?

If you have questions about voting, completing the proxy form or residency declaration, or about the meeting in general, please contact our proxy solicitation agent, Kingsdale Shareholder Services.

Phone: 1.888.518.1558

(toll free within North America)

1.416.867.2272

(collect from outside North America)

Email contactus@kingsdaleshareholder.com.

6 CAMECO CORPORATION

About voting

Who can vote

We have common shares and one class B share, but only holders of our common shares have full voting rights.

If you held common shares at the close of business on March 14, 2016 (the record date), you or the person you appoint as your proxyholder can attend the annual meeting and vote your shares. Each Cameco common share you own represents one vote, except where ownership and voting restrictions apply.

As of March 8, 2016, we had 395,792,522 common shares issued and outstanding.

Ownership and voting restrictions

There are restrictions on owning, controlling and voting Cameco common shares whether you own the shares as a registered shareholder, hold them beneficially, or control your investment interest in Cameco directly or indirectly. These are described in the Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) (ENL Reorganization Act) and our company articles.

See Appendix A on page 92 for the definitions in the ENL Reorganization Act, including definitions of resident and non-resident. The following is a summary of the limitations listed in our company articles.

RESIDENTS

A Canadian resident, either individually or together with associates, cannot hold, beneficially own or control shares or other Cameco securities, directly or indirectly, representing more than 25% of the total votes that can be cast to elect directors.

NON-RESIDENTS

A non-resident of Canada, either individually or together with associates, cannot hold, beneficially own or control shares or other Cameco securities, directly or indirectly, representing more than 15% of the total votes that can be cast to elect directors.

VOTING RESTRICTIONS

All votes cast at the meeting by non-residents, either beneficially or controlled directly or indirectly, will be counted and pro-rated collectively to limit the proportion of votes cast by non-residents to no more than 25% of the total shareholder votes cast at the meeting.

RESIDENCY DECLARATIONS

We require shareholders to declare their residency, ownership of Cameco shares, and other things relating to the restrictions, so we can verify compliance with the ownership and voting restrictions on our shares.

Nominees such as banks, trust companies, securities brokers or other financial institutions who hold the shares on behalf of non-registered shareholders need to make the declaration on their behalf.

If you own the shares in your name, you will need to complete the residency declaration on the enclosed proxy form. Copies will be available at the meeting if you are planning to attend the meeting. If we do not receive your residency declaration, we may consider you to be a non-resident of Canada.

The chair of the meeting may ask shareholders and their nominees for additional information to verify compliance with our ownership and voting restrictions. The chair of the meeting will use the declarations and other information to decide whether our ownership restrictions have been complied with.

WHY RESIDENCY IS IMPORTANT

Cameco shares have restrictions on ownership and voting for residents and non-residents of Canada. Ownership restrictions were put in place so that Cameco would remain Canadian controlled. The uranium mining industry has restrictions on ownership by non-residents.

A non-resident is:

● an individual, other than a Canadian citizen, who is not ordinarily resident in Canada

● a corporation

● that was incorporated, formed or otherwise organized outside Canada, or

● that is controlled by non-residents, either directly or indirectly

● a trust

● that was established by a non-resident, other than a trust for the administration of a pension fund for individuals where the majority of the individuals are residents or

● where non-residents have more than 50% of the beneficial interest

● a foreign government or foreign government agency.

Anyone not included in the above description of non-resident is considered a resident. Residents can be individuals, corporations, trusts and governments or government agencies.

ENFORCEMENT

The company articles allow us to enforce the ownership and voting restrictions by:

● suspending voting rights

● forfeiting dividends

● prohibiting the issue and transfer of Cameco shares

● requiring the sale or disposition of Cameco shares

● suspending all other shareholder rights.

2016 MANAGEMENT PROXY CIRCULAR 7

Principal holders of common shares

We have one principal holder of our common shares as of December 31, 2015, as reported in a Schedule 13G filing made with the US Securities Exchange Commission – Blackrock, Inc. of New York, NY held 24,401,831 common shares (including its subsidiaries), or approximately 6.2%, of our total common shares outstanding.

Management is not aware of any other shareholder who holds 5% or more of our common shares.

Our class B share

The province of Saskatchewan holds our one class B share. This entitles the province to receive notices of and attend all meetings of shareholders, for any class or series.

The class B shareholder can only vote at a meeting of class B shareholders, and votes as a separate class if there is a proposal to:

●

amend Part 1 of Schedule B of the articles, which states that:

●

Cameco’s registered office and head office operations must be in Saskatchewan

●

the executive officers and generally all of the senior officers (vice-presidents and above) must live in Saskatchewan

●

all annual meetings of shareholders must be held in Saskatchewan

●

amalgamate, if it would require an amendment to Part 1 of Schedule B, or

●

amend the articles in a way that would change the rights of class B shareholders.


		HOW CAMECO WAS FORMED
		HOW CAMECO WAS FORMED
Cameco Corporation was formed in 1988 by privatizing two Crown corporations, combining the uranium mining and milling operations of Saskatchewan Mining Development Corporation and the uranium mining, refining and conversion operations of Eldorado Nuclear Limited. Cameco received these assets in exchange for: ● assuming substantially all of the current liabilities and certain other liabilities of the two companies ● issuing common shares ● issuing one class B share ● issuing promissory notes. The company was incorporated under the Canada Business Corporations Act. You can find more information about our history in our most recent annual information form, which is available on our website (cameco.com/investors).

How to vote

You can vote by proxy, or you can attend the meeting and vote your shares in person.

Voting by proxy

Voting by proxy is the easiest way to vote. It means you are giving someone else the authority to attend the meeting and vote for you (called your proxyholder).

Tim Gitzel, president and CEO of Cameco, or in his absence Sean Quinn, senior vice-president, chief legal officer and corporate secretary (the Cameco proxyholders), have agreed to act as proxyholders to vote your shares at the meeting according to your instructions. Or you can appoint someone else to represent you and vote your shares at the meeting.

If you appoint the Cameco proxyholders but do not tell them how you want to vote your shares, your shares will be voted:

●	*for* electing each nominated director

●	*for* appointing KPMG LLP as auditors

●	*for* the advisory vote on our approach to executive compensation.

If for any reason a nominated director becomes unable to serve, the Cameco proxyholders have the right to vote for another nominated director at their discretion, unless you have indicated that you want to withhold your shares from voting on the election of directors.

If there are amendments or other items of business that properly come before the meeting, your proxyholder can vote on each matter as he or she sees fit, as permitted by law, whether or not it is a routine matter, an amendment or contested item of business.


		ARE YOU A REGISTERED OR A NON-REGISTERED SHAREHOLDER?

You are a registered shareholder if your name appears on your share certificate. You are a non-registered (beneficial) shareholder if your bank, trust company, securities broker, trustee or other financial institution holds your shares (your nominee). This means the shares are registered in your nominee’s name, and you are the beneficial shareholder. Many of our shareholders are non-registered shareholders. The voting process is different depending on whether you are a registered or non-registered shareholder (see below for details).

Cameco sends proxy materials directly to registered shareholders and provides materials to intermediaries to forward to non-registered shareholders. We pay the cost of proxy solicitation for all registered and non-registered shareholders.

8 CAMECO CORPORATION

WAYS TO VOTE BY PROXY

Registered shareholders can vote in one of four ways.

1. On the internet

Go to cstvotemyproxy.com and follow the instructions on screen. You will need your 13-digit control number, which appears below your name and address on your proxy form.

2. By fax

Complete the enclosed proxy form, including the residency declaration, sign and date it and fax both pages of the form to:

CST Trust Company

Attention: Proxy department

1.866.781.3111 (toll free within North America)

1.416.368.2502 (from outside North America)

3. By mail

Complete your proxy form, including the residency declaration, sign and date it, and send it to our transfer agent in the envelope provided or to the following address:

CST Trust Company

Attention: Proxy department

P.O. Box 721

Agincourt, Ontario M1S 0A1

4. By appointing someone else to attend the meeting and vote your shares for you

Print the name of the person you are appointing as your proxyholder in the space provided. This person does not need to be a shareholder.

Make sure your appointee understands that they must attend the meeting and vote your shares, otherwise your vote will not be counted. Your proxyholder will need to check in with a CST Trust Company representative when they arrive at the meeting.

Non-registered shareholders: Submit your voting instructions by following the instructions on the enclosed voting instruction form. Submit them right away to give your nominee enough time to receive them and send them to our transfer agent in time for the meeting.

In most cases, you can send your voting instructions via the internet or by fax or mail. Your nominee will likely need to receive instructions from you at least one business day before Monday, May 9, 2016.

Send your completed proxy form right away.

Make sure you allow enough time for it to reach our transfer agent if you are sending it by mail. CST Trust Company must receive your proxy voting instructions before 8:30 a.m. CST on Monday, May 9, 2016 for it to be valid.

If the meeting is postponed or adjourned, CST Trust Company must receive your voting instructions at least 48 hours (excluding Saturdays, Sundays and statutory holidays) before the reconvened meeting.

If you are an administrator, trustee, attorney or guardian for a person who beneficially holds or controls Cameco shares, or an authorized officer or attorney acting on

behalf of a corporation, estate or trust that beneficially holds or controls our common shares, follow the instructions on the proxy form.

The notice can be from you or your attorney, if he or she has your written authorization. If your shares are owned by a corporation, the written notice must be from its authorized officer or attorney.

The chair of the meeting has the discretion to accept or reject any late proxies, and can waive or extend the deadline for the receipt of proxy voting instructions without notice.

VOTING IN PERSON

Do not complete the enclosed proxy form if you are a registered shareholder and want to vote in person. Your vote will be taken and counted at the meeting.

Non-registered shareholders: If you want to vote in person at the meeting, follow the instructions on the enclosed voting instruction form to appoint yourself as proxyholder, or to appoint someone else to attend the meeting and vote for you.

If you appoint yourself or someone other than the Cameco proxyholders and do not specify how your shares are to be voted, you or your appointee will have full discretionary authority to vote at the meeting.

If you change your mind

If you change your mind about how you want to vote your shares, you can revoke your proxy or voting instructions. Instructions provided on a proxy form or voting instruction form with a later date, or at a later time if you are voting on the internet, will revoke any prior instructions.

Any new instructions will only take effect if they are received by CST Trust Company before 8:30 a.m. CST on Monday, May 9, 2016. If the meeting is postponed or adjourned, CST Trust Company must receive your new voting instructions at least 48 hours (excluding Saturdays, Sundays and statutory holidays) before the meeting is reconvened for your new voting instructions to be valid. If you are a registered shareholder, you can revoke your proxy without providing new voting instructions by:

●

sending a notice in writing to the corporate secretary at Cameco, at 2121 - 11th Street West, Saskatoon, Saskatchewan S7M 1J3, so he receives it by 5 p.m. CST on Tuesday, May 10, 2016. If the meeting is postponed or adjourned, the corporate secretary must receive the notice by 5 p.m. CST on the day before the meeting is reconvened.

●	giving a notice in writing to the chair of the meeting before the start of the meeting.

●	giving notice in any other manner permitted by law.

Non-registered shareholders: Contact your nominee if you need help providing new voting instructions, if you want to revoke your voting instructions (without giving new instructions) or you want to vote in person instead.

2016 MANAGEMENT PROXY CIRCULAR 9

About the nominated directors


Our board of directors is responsible for overseeing management and our business affairs. As shareholders, you elect the board to act in the best interests of Cameco. This year the board has nominated 10 directors. Since our last annual meeting, the board appointed Don Kayne to the board and he will stand for election for the first time. The other nine directors currently serve on the board and have agreed to stand for re-election. The following directors are nominated for election:
Ian Bruce				Tim Gitzel
Daniel Camus				Jim Gowans
John Clappison				Don Kayne
Donald Deranger				Anne McLellan
Catherine Gignac				Neil McMillan

Directors who are elected will serve until the end of the next annual meeting, or until a successor is elected or appointed.

The director profiles starting on the next page tell you about each director, including his or her qualifications, background, experience, committee membership, meeting attendance, how much equity he or she owns in Cameco and 2015 voting results.

The directors have been selected based on their collective ability to contribute expertise to the broad range of issues the board faces when carrying out its responsibilities in overseeing our business and affairs.

Diversity and independence are also important requirements of our board to make sure decisions are made in the best interests of the company. See page 25 for information on independence and page 27 for information on board diversity.

You can vote for all of the nominated directors, vote for some of them and withhold votes for others, or withhold votes for all of them. Unless otherwise instructed, the named proxyholders will vote for each of the nominated directors (see pages 11 to 17 for details).


	WHERE TO FIND IT	11
	WHERE TO FIND IT	11
	• Director profiles..................................................	11
	• Meeting attendance...........................................	18
	• Director development.........................................	19
	• About the board..................................................	25
	• Board committees..............................................	35
OUR POLICY ON MAJORITY VOTING Under corporate law, a nominated director can be elected with a single for vote, no matter how many votes were withheld. We adopted a majority voting policy in 2006 to govern the election of directors in an uncontested election (where the number of nominated directors equals the number of board positions). It requires each director to receive a majority of for votes in order to be elected. Any director who receives more withhold than for votes in an uncontested election must offer to resign immediately. Our nominating, corporate governance and risk committee will review the voting result and recommend to the board whether to accept the resignation or not within 90 days of the meeting. Unless there are exceptional circumstances, the committee and the board will accept the resignation and it will take effect when accepted by the board. The resigning director does not participate in any board or committee deliberations on the matter. The board will announce its decision immediately. If it rejects the resignation, it will fully explain why. If the board accepts the resignation, it may appoint a new director to fill the vacancy.

10 CAMECO CORPORATION

Director profiles

The following pages tell you about each nominated director as of March 8, 2016, including their background, experience and memberships on other public company boards. Eight of the 10 nominated directors (80%) are independent.

The profiles include the voting results for each director at last year’s annual meeting and their 2015 meeting attendance. Each director has provided the information about the Cameco shares they own or exercise control or direction over. Their holdings of Cameco shares and deferred share units (DSUs) are as of December 31, 2015.

Non-executive directors receive part of their compensation in DSUs, aligning the interests of our directors and shareholders. Each director’s profile shows the total value of his or her shares and DSUs. We have calculated that value by using $17.07 for 2015 and $19.05 for 2014, the year-end closing prices of Cameco shares on the Toronto Stock Exchange (TSX). When reviewing compliance with our share ownership guidelines, we use our year-end share price on the TSX or the price the shares or units were acquired at, whichever is higher.

All non-executive directors are in compliance with the share ownership guidelines for directors. Tim Gitzel, our CEO, is also in compliance with his share ownership guidelines.

DIRECTOR SHARE OWNERSHIP

We increased our share ownership requirements for directors and the board chair from three times to four times their annual retainer in 2014 (see page 43).

See page 45 for the portion of the total retainer that each non-executive director received in DSUs in 2015.

Neil McMillan (64) | Chair of the board | Independent

Neil McMillan is the former president and CEO of Claude Resources Inc., a Saskatchewan-based gold mining company. Neil previously served on the board of Atomic Energy Canada Ltd., a Canadian government nuclear reactor production and services company and currently serves on the board of Shore Gold Inc.

Neil holds a bachelor of arts degree from the University of Saskatchewan, and is a former member of the Saskatchewan legislature. Neil’s CEO experience gives the board access to a ground level view of many of the daily mining risks and opportunities faced by Cameco. His background as an investment adviser and legislator, and his knowledge of the political

Neil has been a Cameco director for 13 years. He brings extensive business, industry and senior executive experience to the board. He serves as chair of the Cameco board and is an ex-officio member of each of the five board committees.

and business environment in Saskatchewan, are valuable when the board is reviewing investment opportunities. In addition to his extensive experience as a senior executive, he has served on the compensation and audit committees of other public company boards and served two years on Cameco’s human resources and compensation committee. Neil served as a director of Philom Bios Inc. from 1997 to 2003 and as a director of Claude Resources Inc. from 1995 to 2014.

2015

2015 ATTENDANCE

VOTING RESULTS

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL*

98.7% for

1.3% withheld

Board of directors (chair)

5 of 5

100%

Director since 2002

Saskatoon, SK

Canadian

Experience

● CEO experience

● Executive

compensation

● Government

relations

● Investment

industry

● Mining

● Risk management

* As board chair, Neil also attended 25 committee meetings in an ex-officio capacity.

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS

Shore Gold Inc.

Audit, Compensation

SECURITIES HELD

Year

Cameco shares

DSUs

Total shares and DSUs

Total value of shares and DSUs

Meets share

ownership targets

2015

2014

Change

600

–

64,157

49,959

14,198

64,757

50,559

14,198

$1,105,406

963,158

$142,348

Yes

For share ownership compliance, Neil’s shares and DSUs held at December 31, 2015 are valued at $1,703,672

2016 MANAGEMENT PROXY CIRCULAR 11

LOGO

Director since 2012

Calgary, AB

Canadian

Ian Bruce (62) | Independent

Ian Bruce is the former president and CEO of Peters & Co. Limited, an independent investment dealer. He has more than 30 years of experience in investment banking with specialization in corporate finance and mergers and acquisitions, predominantly in the oil and gas industry.

Ian brings a strong finance and investment banking background as well as board, executive and energy sector experience to the Cameco board and his work on three of our board committees.

He also serves on the audit committees of two other public companies.

Ian is a fellow of the Chartered Professional Accountants of Alberta, a recognized Specialist in Valuation under Canadian CPA rules, and is a chartered business valuator. He is a past member of the Expert Panel on Securities Regulation for the Minister of Finance of Canada. Ian is also a past board member and chair of the Investment Industry Association of Canada.

Ian is a director of the private companies Laricina Energy Ltd., Pumpwell Solutions Ltd. and TriAxon Oil Corp. He was a director of the public company Hardy Oil & Gas plc from 2008 to 2012.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

90.1% for

Board of directors

5 of 5

100%

9.9% withheld

Audit and finance

6 of 6

1 of 1

100%

Human resources and compensation

5 of 5

1 of 1

100%

Reserves oversight

3 of 3

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS


Experience		Logan International Inc. Audit Northern Blizzard Resources Inc. Lead director, Audit (chair), Compensation
● ● ● ● ●	CEO experience Finance Investment banking Mergers and acquisitions Risk management	SECURITIES HELD

		Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

		2015	75,000	19,700	94,700	$1,616,530	Yes
		2014	75,000	13,118	88,118	$1,678,645
		Change	–	6,582	6,582	$(62,115)

		For share ownership compliance, Ian’s shares and DSUs held at December 31, 2015 are valued at $2,092,401

		Ian is a director of Laricina Energy Limited (Laricina), a junior oil sands private company, since 2013. Laricina has been under Companies’ Creditors Arrangement Act (Canada) (CCAA) protection since March 26, 2015. Its restructuring plan was approved by the Alberta Court of Queen’s Bench on July 22, 2015. It exited from CCAA protection on February 1, 2016.

LOGO

Daniel Camus (63) | Independent

Daniel Camus is CFO of the humanitarian finance organization, The Global Fund to Fight AIDS, Tuberculosis and Malaria. He is the former group CFO and head of strategy and international activities of Electricité de France SA (EDF). Based in France, EDF is an integrated energy operator active in the generation (including nuclear generation), distribution, transmission, supply and trading of electrical energy with international subsidiaries.

Daniel brings CFO, international business and energy sector experience, in particular in nuclear, to the Cameco board and the three committees he is a member of. He also chairs the audit committee of another public company.

Daniel holds a PhD in Economics from Sorbonne University, and an MBA in finance and economics from the Institute d’Études Politiques de Paris. Over the past 25 years,

he has held various senior roles with the Aventis and Hoechst AG Groups in Germany, the US, Canada and France. He has been chair of several audit committees and brings experience in human resources and executive compensation through his senior executive roles at international companies where he worked on business integrations in Germany, the US, Canada and France. He was a director of the public companies Morphosys AG, Munich from 2003 to 2015, and Vivendi SA, Paris from 2010 to 2015.

2015

VOTING RESULTS

BOARD AND COMMITTEE MEMBERSHIP

2015 ATTENDANCE

IN PERSON

TELECONFERENCE

OVERALL

89.6% for

Board of directors

5 of 5

100%

Director since 2011

Geneva, Switzerland

Canadian and French

Experience

10.4% withheld

Audit and finance

6 of 6

1 of 1

100%

Human resources and compensation

5 of 5

1 of 1

100%

Safety, health and environment

5 of 5

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS

●

Nuclear industry

Finance

Electricity industry

Executive compensation

International

Mergers and acquisitions

Risk management

Valeo SA, Paris Audit and risks (chair)

SGL Carbon AG, Wiesbaden Nomination, Strategy/technology (chair)

SECURITIES HELD

Year

Cameco shares

DSUs

Total shares and
DSUs

Total value of shares
and DSUs

Meets share

ownership targets

2015

–

48,709

$831,462

Yes

2014

–

39,012

$743,186

Change

–

9,697

$88,276

For share ownership compliance, Daniel’s shares and DSUs held at December 31, 2015 are valued at $982,897

12 CAMECO CORPORATION

LOGO

Director since 2006

Toronto, ON

Canadian

John Clappison (69) | Independent

John Clappison is the former managing partner of the Greater Toronto Area office of PricewaterhouseCoopers LLP, where he spent 37 years. He is a fellow of the Chartered Professional Accountants of Ontario.

John brings extensive financial experience as well as governance, risk management, compensation and other business experience to the Cameco board. He serves on two of our board committees, including as chair of the audit and finance committee, and is currently a member of two other public company boards.

In addition to his extensive financial experience, John brings to Cameco’s board his experience in governance, risk management and executive compensation. He also brings international business acumen as a senior member of the PwC executive team.

In addition to the public company boards listed below, John serves as a director of the private company, Summitt Energy Holdings GP Inc. and was a director of the public companies Inmet Mining Corporation from 2010 to 2013 and Canadian Real Estate Investment from 2007 to 2011. He is actively involved with the Face the Future Foundation, the Shaw Festival Theatre Endowment Foundation and the Corporation of Roy Thomson Hall and Massey Hall Foundation.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

99.0% for

Board of directors

5 of 5

100%

1.0% withheld

Audit and finance (chair)

6 of 6

1 of 1

100%

Nominating, corporate governance and risk

5 of 5

2 of 2

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS


Experience		Rogers Communications Inc. Sun Life Financial Inc.		Audit and risk (chair), Pension, Corporate governance Governance, nominating and investment (chair), Audit
● ● ● ●	Finance Risk management Corporate governance Executive compensation	SECURITIES HELD

		Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

		2015	3,000¹	42,077	45,077	$769,466	Yes
		2014	4,200	35,699	39,899	$760,082
		Change	(1,200)	6,378	5,178	$9,384

		For share ownership compliance, John’s shares and DSUs held at December 31, 2015 are valued at $1,094,278
		¹John’s share ownership increased in 2013 as a result of being appointed co-executor of an estate that held Cameco shares as part of its investment portfolio. The portfolio was liquidated in 2015, resulting in a decrease in John’s shares.

LOGO

Director since 2009

Prince Albert, SK

Canadian

Experience

Donald Deranger (60) | Not independent

Donald Deranger is an advisor to the Athabasca Basin Development Corporation and non-executive chair of the board of Points Athabasca Contracting Limited Partnership, a northern Saskatchewan aboriginal contractor, which does business with Cameco. He also acts as a governance advisor to Fond Du Lac, a Dené Nation located in the Athabasca basin involved in uranium exploration.

Donald is the past president of Learning Together, a non-profit aboriginal organization that works to build relationships with the mining industry and continues to assist in an ex-officio capacity. He was the Athabasca vice chief of the Prince Albert Grand Council from 2003 to 2012. Donald also serves as a director of the Tazi Twe Hydroelectric Project and Sylvia Fedorchuk Centre for Nuclear Innovation, both since 2014.

An award-winning leader in the Saskatchewan aboriginal community, Donald brings to the board a deep understanding of the culture and peoples of northern Saskatchewan where our richest assets are located. Donald has not served on any other public company boards over the past five years.

Donald’s experience as a contractor in northern Saskatchewan and leader in the Saskatchewan aboriginal community provides a rich, valuable and unique perspective to the Cameco board and his work on two of our board committees.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

98.2% for

Board of directors

5 of 5

100%

1.8% withheld

Reserves oversight

3 of 3

100%

Safety, health and environment

5 of 5

100%

Other public company boards and committee memberships: none


● ● ●	Aboriginal affairs First Nations governance Corporate governance	SECURITIES HELD

		Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

		2015	–	33,776	33,776	$576,563	Yes
		2014	–	24,710	24,710	$470,717
		Change	–	9,066	9,066	$105,846

		For share ownership compliance, Donald’s shares and DSUs held at December 31, 2015 are valued at $729,438

2016 MANAGEMENT PROXY CIRCULAR 13

LOGO

Director since 2014

Mississauga, ON

Canadian

Catherine Gignac (54) | Independent

Catherine Gignac is a corporate director since 2011. She has more than 30 years of experience in capital markets and the mining industry. Catherine has held senior positions as a mining equity research analyst with leading global brokerage firms and independent boutiques, including NCP Northland Capital Partners from 2009 to 2011. She has extensive experience in project value and investment analysis, and spent her early years as a geologist.

Catherine’s extensive career as a mining equity research analyst and geologist, and experience in project value analysis and mergers and acquisitions expand the range of the board’s skills. She is chair of our reserves oversight committee and also serves on one other board committee.

Catherine is a member of the Institute of Corporate Directors, the CFA Institute, the Mineral Resource Analyst Group, the Canadian Institute of Mining & Metallurgy and the Prospectors and Developers Association of Canada (PDAC).

Catherine served on the board of St. Andrew Goldfields Ltd. from 2011 to 2015 and the board of Azul Ventures Inc. from 2012 to 2013. She was the principal of Catherine Gignac & Associates from 2011 to 2015. She volunteers with the Canadian Securities Administrators’ mining technical advisory and monitoring committee, the convention planning committee for the PDAC and Crohn’s & Colitis Canada.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

99.2% for

Board of directors

5 of 5

100%

0.8% withheld

Audit and finance

6 of 6

1 of 1

100%

Reserves oversight (chair)

3 of 3

100%

Safety, health and environment

2 of 2

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS


Experience		Corvus Gold Inc. Trevali Mining Corporation		Board chair, Compensation, Corporate governance and nominating Audit, Nominating and corporate governance, Sustainability
● ● ● ●	Mining, exploration and operations Investment industry Mineral resource estimation Project value analysis	SECURITIES HELD

		Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

		2015	3,000	9,998	12,998	$221,869	Catherine has until January 2021 to acquire additional shares and DSUs to meet her target
		2014	3,000	4,318	7,318	$139,410
		Change	–	5,680	5,680	$82,459


		For share ownership compliance, Catherine’s shares and DSUs held at December 31, 2015 are valued at $246,332

14 CAMECO CORPORATION

LOGO

Director since 2011

Saskatoon, SK

Canadian

Tim Gitzel (53) | President and CEO | Not independent

Tim Gitzel is president and CEO of Cameco since 2011. He was appointed president in 2010 and served as senior vice-president and chief operating officer (COO) from 2007 to 2010. Tim has more than 20 years of senior management experience in Canadian and international uranium activities. Prior to joining Cameco, he was executive vice president, mining business unit for AREVA in Paris, France, where he was responsible for global uranium, gold, exploration and decommissioning operations in 11 countries.

As Cameco’s president and CEO, Tim brings the day-to-day business and operations perspective to the board, and is responsible for executing Cameco’s strategy. Tim has over two decades of industry experience and brings added perspective as a member of the board of the World Nuclear Association.

Tim received his bachelor of arts and law degrees from the University of Saskatchewan. He participated in an executive education programme facilitated by INSEAD in France. He was appointed to the board of the Nuclear Energy Institute in 2011 and to The Mosaic Company board in October 2013. He served as chair of the World Nuclear Association from 2012 to 2014 and continues to serve as a member of the board. He is also a member of the Business Council of Canada.

Tim is past president of the Saskatchewan Mining Association, and has served on the boards of SaskEnergy Corporation, the Saskatchewan Chamber of Commerce and Junior Achievement of Saskatchewan. He serves our community in numerous capacities, including several current and past leadership positions with charitable and non-profit organizations. Except for the public company listed below, Tim has not served on any other public company boards over the past five years.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

98.7% for

Board of directors

5 of 5

100%

1.3% withheld

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS

Experience

The Mosaic Company

Audit, Corporate governance and nominating

●

International

Mining

Nuclear industry

Risk management

SECURITIES HELD

Year

Cameco shares

PSUs*

RSUs

Total shares,
PSUs and RSUs

Total value of shares,
PSUs and RSUs**

Meets share

ownership targets

2015

181,968

163,900

–

345,868

$5,903,967

See page 61 for the CEO

2014

99,252

138,000

–

237,252

$4,519,651

ownership requirement (no

Change

82,716

25,900

–

108,616

$1,384,316

requirement as a director)

Excludes PSUs that vested on December 31 of the year.

Value of shares ($3,106,194) and PSUs ($2,797,773) for 2015 are calculated using $17.07 and $19.05 for 2014, the year-end closing prices of Cameco shares on the TSX. This is the total value of Tim’s accumulated shares and other equity-based holdings.

Options held: See Incentive plan awards on page 81.

2016 MANAGEMENT PROXY CIRCULAR 15

LOGO

Director since 2009

Surrey, BC

Canadian

Jim Gowans (64) | Independent

Jim Gowans is president and CEO and a director of Arizona Mining Inc. since January 2016. He was senior advisor to the chair of the board of Barrick Gold Corporation from August to December 2015, co-president from July 2014 to August 2015 and executive vice president and COO from January to July 2014. He served as managing director of the Debswana Diamond Company in Botswana from 2011 to 2014. He has extensive experience as a senior executive in the mining industry, including holding executive positions at DeBeers SA, DeBeers Canada Inc. and PT Inco in Indonesia. Jim is the past chair of The Mining Association of Canada.

Jim brings strong experience in the resource sector to Cameco’s board through an extensive career as a senior executive with several major mining companies and his role as past chair of The Mining Association of Canada. He serves on two of our board committees including as chair of the safety, health and environment committee.

Jim received a bachelor of applied science degree in mineral engineering from the University of British Columbia and attended the Banff School of Advanced Management. He has extensive mining knowledge and perspective on the importance of corporate social responsibility and brings human resources experience as a former vice president, human resources at Placer Dome.

Jim was a director of the public company PhosCan Chemical Corp. from 2008 to June 2014, and he served on its compensation committee for the full tenure. In addition to the public company boards listed below, Jim is a director of the private company, Gedex Technologies Inc., since 2015.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

99.1% for

Board of directors

5 of 5

4 of 5

90%

0.9% withheld

Reserves oversight

3 of 3

100%

Safety, health and environment (chair)

5 of 5

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS


Experience	Arizona Mining Inc. Dominion Diamond Corporation
● CEO experience ● Mining and exploration ● Executive compensation ● International	SECURITIES HELD

	Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

	2015	1,000	56,381	57,381	$979,502	Yes
	2014	1,000	43,209	44,209	$842,176
	Change	–	13,172	13,172	$137,326

	For share ownership compliance, Jim’s shares and DSUs held at December 31, 2015 are valued at $1,235,176

LOGO

Director since 2016

Tsawwassen, BC

Canadian

Experience

Don Kayne (58) | Independent

Don Kayne is the president and CEO of Canfor Corporation since May 2011. He is also the CEO of Canfor Pulp Products Incorporated since September 2012.

Don has spent his entire career at Canfor, starting out as a regional sales representative in 1979. Prior to being appointed CEO, Don spent 10 years as Canfor’s vice president of sales and marketing, and is one of the lead architects of the market for British Columbia lumber in China. Don’s work growing markets for Canfor products around the world has provided him with deep connections to markets and customers in every region Canfor serves.

Don is a director of the Bi-National Softwood Lumber Council, Forest Products Association of Canada, Council of Forest Industries, Alberta Forest Products Association and the BC Lumber Trade Council. Don is vice chair of the Bi-National Softwood Lumber Council and serves as chair of its programs committee. He is an audit committee member and the former board chair of the Forest Products Association of Canada. He is also chair of the charitable organization Educating Girls of Rural China Foundation, which works to transform the lives of women and communities in rural areas of western China by providing access to education.

Don was appointed to Cameco’s board in January 2016. He brings many years of experience as a business executive in Canada’s resource industry to the Cameco board as well as valuable insights into emerging Asian markets where Cameco does business.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

n/a

Don has not yet been appointed to any committee. Since his appointment on January 1, 2016, he has been attending all committee meetings as part of his director orientation.

Other public company boards and committee memberships: none

●

CEO experience

International

Executive

compensation

SECURITIES HELD

Year

Cameco shares

DSUs

Total shares and
DSUs

Total value of shares
and DSUs

Meets share

ownership targets

2015

–

Don has until January 2021 to

acquire shares and DSUs to

meet his target

For share ownership compliance, Don’s shares and DSUs held at December 31, 2015 are valued at: n/a

16 CAMECO CORPORATION

LOGO

Director since 2006

Edmonton, AB

Canadian

Anne McLellan (65) | Independent

The Honourable Anne McLellan is a former deputy prime minister of Canada and has held several senior cabinet positions, including federal Minister of Natural Resources, Minister of Health, Minister of Justice and Attorney General of Canada, and federal interlocutor of Métis and non-status Indians. Since leaving politics, she served as distinguished scholar in residence at the University of Alberta in the Alberta Institute for American Studies from 2006 to 2013 and is senior advisor in the national law firm Bennett Jones LLP. Anne is the Chancellor of Dalhousie University since May 2015.

Anne is a lawyer and corporate director and brings a rich and broad perspective on business and governance to Cameco’s board and three committees through her work experience and distinguished career in public service and higher education in Canada. Anne held a number of ministerial portfolios and also served as former deputy prime minister of Canada.

Anne holds a bachelor of arts degree and a law degree from Dalhousie University, and a master of laws degree from King’s College, University of London. In addition to her extensive experience in federal administration and policy, Anne served on the board of Nexen Inc. from 2006 to 2013 and as a member of its compensation committee. Anne also served on the board of the Edmonton Regional Airport Authority, Canada’s fifth largest airport, from 2008 to 2015 where she served as chair of the governance and compensation committee. Currently, she chairs the environment, health, safety and security committee of Agrium Inc.

2015

VOTING RESULTS

2015 ATTENDANCE

BOARD AND COMMITTEE MEMBERSHIP

IN PERSON

TELECONFERENCE

OVERALL

90.3% for

Board of directors

5 of 5

100%

9.7% withheld

Human resources and compensation

5 of 5

1 of 1

100%

Nominating, corporate governance and risk

5 of 5

2 of 2

100%

Safety, health and environment

5 of 5

100%

OTHER PUBLIC COMPANY BOARDS AND COMMITTEE MEMBERSHIPS


Experience		Agrium Inc.		Audit, Environment, health, safety and security (chair)
● ● ● ●	Corporate social responsibility Executive compensation Government relations Health and safety	SECURITIES HELD

		Year	Cameco shares	DSUs	Total shares and DSUs	Total value of shares and DSUs	Meets share ownership targets

		2015	100	33,413	33,513	$572,066	Yes
		2014	100	27,224	27,324	$520,518
		Change	–	6,189	6,189	$51,548


		For share ownership compliance, Anne’s shares and DSUs held at December 31, 2015 are valued at $859,565

2016 MANAGEMENT PROXY CIRCULAR 17

Meeting attendance

We believe that an active board governs more effectively. We expect our directors to attend all board meetings, all of their committee meetings and the annual meeting of shareholders. Directors can participate by teleconference if they are unable to attend meetings in person. The board must have a majority of directors in attendance to hold a meeting and transact business.

The table below shows the meeting attendance for each director in 2015 and whether they are independent (see pages 23 and 25 to read more about director independence). The board and committees met in camera without management present at each meeting, and the independent directors met once in camera in accordance with our governance guidelines. All directors attended the 2015 annual meeting. You can read more about our expectations for directors on page 26.

As board chair, Neil McMillan is an ex-officio member of each board committee and attended 25 committee meetings. Board committees function separately from management, so Tim Gitzel, our president and CEO, is not a member of any board committee.

Joe Colvin and Victor Zaleschuk retired from the board on May 22, 2015. James Curtiss and Nancy Hopkins are not standing for re-election this year, consistent with our new tenure policy (see page 26). James has served on the board since 1994 and Nancy has served since 1992.

2015 MEETING ATTENDANCE

NAME

INDEPENDENT

BOARD

AUDIT AND
FINANCE
COMMITTEE

HUMAN
RESOURCES AND

COMPENSATION
COMMITTEE

NOMINATING,
CORPORATE
GOVERNANCE
AND RISK
COMMITTEE

RESERVES
OVERSIGHT
COMMITTEE

SAFETY,
HEALTH AND
ENVIRONMENT
COMMITTEE

Ian Bruce

10 of 10 (100%)

7 of 7 (100%)

6 of 6 (100%)

3 of 3 (100%)

Daniel Camus

10 of 10 (100%)

7 of 7 (100%)

6 of 6 (100%)

5 of 5 (100%)

John Clappison

10 of 10 (100%)

7 of 7 (100%)

(chair)

7 of 7 (100%)

James Curtiss

10 of 10 (100%)

6 of 6 (100%)

(chair)

7 of 7 (100%)

Donald Deranger

10 of 10 (100%)

3 of 3 (100%)

5 of 5 (100%)

Catherine Gignac

10 of 10 (100%)

7 of 7 (100%)

3 of 3 (100%)

(chair)

2 of 2 (100%)

Tim Gitzel

10 of 10 (100%)

Jim Gowans

9 of 10 (90%)

3 of 3 (100%)

5 of 5 (100%) (chair)

Nancy Hopkins

10 of 10 (100%)

7 of 7 (100%)

(chair)

Don Kayne

(joined the board on

January 1, 2016)

Anne McLellan

10 of 10 (100%)

6 of 6 (100%)

7 of 7 (100%)

5 of 5 (100%)

Neil McMillan

10 of 10 (100%) (chair)

7 of 7 (100%)

6 of 6 (100%)

5 of 7 (71%)

3 of 3 (100%)

4 of 5 (80%)

Joe Colvin

6 of 6 (100%)

3 of 3 (100%)

2 of 2 (100%)

Victor Zaleschuk

5 of 6 (83%)

3 of 3 (100%)

2 of 2 (100%)

1 of 1 (100%)

80% of the nominated directors

are independent

Total # of 10

meetings

18 CAMECO CORPORATION

Director development

Our directors are knowledgeable about issues affecting our business, the nuclear industry, governance, compensation and related matters. We believe that our education program gives them additional knowledge to help effectively oversee our affairs and stay abreast of important developments and issues within the context of our business.

ORIENTATION

Our onboarding and orientation program familiarizes new directors with Cameco, its issues, strategy, culture and values and what we expect of individual directors, the board and committees. All new directors receive orientation that includes:

●

a company and board orientation on corporate organization and history, culture and values, strategy and business, board member expectations and corporate governance practices

●

an educational manual with information about Cameco and the uranium and nuclear industries, including copies of our recent regulatory filings, financial statements, governance documents and key policies

●

a two-day nuclear industry seminar presented by management

●

round table discussions with committee chairs and appropriate management representatives for each committee they join.

All directors are welcome to attend the round table discussions and many take advantage of this opportunity to learn more about Cameco.

Existing directors who join new committees also participate in round table discussions, and are given a copy of the committee’s mandate and the minutes of its four most recent meetings.

CONTINUING EDUCATION

Directors enhance their understanding of our business throughout the year by attending:

●

seminars provided by management that cover issues relating to key business decisions, strategic planning and enterprise risks

●

seminars on topics directors request

●

Cameco-operated facility or other nuclear facility tours

●

external conferences and seminars

●

informal social gatherings with senior management.

The nominating, corporate governance and risk committee is responsible for the board education program, which includes a budget and approval process. Educational needs of directors are identified through a self-assessment questionnaire, in individual meetings with the chair of the nominating, corporate governance and risk committee and in board and committee meetings.

The corporate secretary maintains a calendar of educational opportunities for the directors, including information about relevant webinars and other educational opportunities.

Management and external consultants and experts give presentations on current issues and topics. Directors are encouraged to learn about issues related to the committees they are members of through conferences and events. We pay the costs to attend these sessions and directors who attend external educational opportunities provide updates on the topic to the nominating, corporate governance and risk committee.

The table below lists the education sessions directors attended in 2015. In addition to the sessions identified below, directors attended programs organized by the Institute of Corporate Directors and the National Association of Corporate Directors on topics relating to director education and board governance, emerging audit committee and compensation committee issues, M&A strategy, strategy development, strategy execution and strategy-driven performance measurement.


2015 DIRECTOR DEVELOPMENT	PRESENTED/HOSTED BY	ATTENDED BY

Audit and finance

Ontario Securities Commission whistleblower program: Are you prepared?	Ernst & Young	John Clappison

Oil prices, large project and transaction oversight, and governance trends	Canadian Audit Committee Network	John Clappison

Annual insurance issues conference	KPMG	John Clappison

Insurance financial leaders meeting	KPMG	John Clappison

CPAB 2015 report: big four firm inspection, highlights for audit committees and CPAB mining insights	Stakeholder Engagement division of Canadian Public Accountability Board (CPAB)	Audit and finance committee members

Base erosion and profit shifting (BEPS)	Kevin Chan, Partner PwC	Audit and finance committee members

Compensation

NYSE compensation committee boot camp	NYSE Governance Services	James Curtiss (speaker)

Pay for performance challenges	Meridian Compensation Partners	Ian Bruce

2016 MANAGEMENT PROXY CIRCULAR 19


2015 DIRECTOR DEVELOPMENT	PRESENTED/HOSTED BY	ATTENDED BY

Compensation committee forum	Equilar/NASDAQ	James Curtiss (speaker)

What is compensation’s role in value creation?	On24.com	Nancy Hopkins

Compensation planning outlook for 2016	Conference Board of Canada	Anne McLellan

Issues for the HR committee	Deloitte Directors Series	Nancy Hopkins

Economic and market

Energy conference	Peters & Co.	Ian Bruce

Mergers and acquisitions IV: regulatory approvals, environmental considerations and employee considerations	Bennett Jones Academy	Anne McLellan

Climate change and extreme weather for investors	CFA Institute	Catherine Gignac

The role of the board in M&A	Boardroom excellence series	Nancy Hopkins

Overview of federal election outcomes	Cameco management	All directors

Governance

12th annual board room summit and peer exchange	NYSE Governance Services / Corporate Board Member	James Curtiss

CIM conference - women on boards panel discussion	Canadian Institute of Mining, Metallurgy and Petroleum (CIM)	Catherine Gignac (panelist)

Corporate governance day: major challenges in today’s boardroom	Stanford-Rotman	Catherine Gignac

Goizueta directors institute: educating board members of companies with nuclear electric generating assets	INPO/Goizueta	James Curtiss

Corporate responsibility reporting: global trends	KPMG Advisory Institute	Nancy Hopkins

Global board leader’s summit	National Association of Corporate Directors	Daniel Camus

Mining and operations

Common pitfalls when estimating mineral reserves and evaluating project economics	Prospectors & Developers Association of Canada (PDAC)	Jim Gowans

Commodities and market outlook	PDAC	Jim Gowans

Aboriginal economic development corporation 2015 conference	Canadian Council of Aboriginal Business	Tim Gitzel (keynote speaker)

Nuclear industry

World nuclear spotlight 2015 Beijing – fuel cycle strategies	World Nuclear Association (WNA)	Tim Gitzel (panelist)

World nuclear association symposium 2015	WNA	Ian Bruce Tim Gitzel	Jim Gowans Nancy Hopkins

World nuclear association symposium 2015 – leaders’ perspectives	WNA	Tim Gitzel (panel chair)

Annual CEO conference	Institute of Nuclear Power Operations (INPO)	Tim Gitzel

CNSC update	Dr. Michael Binder, President Canadian Nuclear Safety Commission (CNSC)	All directors

Risk

Regular management presentations on risk oversight	Cameco management	All directors

The mounting risks of cybersecurity: best practices and guidance to protect your organization	NYSE Governance Services	Nancy Hopkins

Data breach liability: are you up to speed?	Osgood Professional Development	Nancy Hopkins

Data loss: legal and regulatory consequences for corporations	KPMG Global Energy Institute	Nancy Hopkins

Enterprise risk management: so now what?	Deloitte Risk Series	Nancy Hopkins

20 CAMECO CORPORATION


Governance at Cameco We believe that sound governance is the foundation for strong corporate performance. This section tells you about three key elements of governance at Cameco: our shareholder commitment, our governance principles and how our board operates. Our governance practices The nominating, corporate governance and risk committee ensures our governance policies and practices are sound and support the board in carrying out its duties. The committee continually monitors changing regulations and emerging best practices. The board approves our corporate governance guidelines annually and any changes as appropriate.
	Where to find it

	Our shareholder commitment		22
	●	Separate chair and CEO positions	22
	●	Shareholder engagement	22
	●	Accessible board	22
	●	Additional governance disclosure	22

	Governance principles		23
	●	Policies and guidelines	23

	About the board		25
	●	Independence	25
	●	Tenure	26
	●	Our expectations for directors	26
	●	Board diversity	27
	●	Skills, attributes and experience	28
	●	Director recruitment and board succession	30
	●	Role of the board	31

	Board committees		35

WHAT WE DO


		Page

Ö	Independent board – eight of our 10 nominated directors (80%) are independent	23, 25

Ö	Non-executive chair leads the board – we maintain separate chair and CEO positions and have had a non-executive, independent board chair since 2003	22

Ö	Share ownership – we require our directors and executives to own shares in Cameco to align their interests with those of our shareholders and share ownership is disclosed	43, 61

Ö	Majority voting for directors – the board adopted a majority voting policy in 2006	10

Ö	Strong risk oversight – the board and committees oversee our risk management program and strategic, financial and operational risks	31

Ö	Formal assessment process – the directors assess the board, committees and individual directors’ performance	34

Ö	Independent third-party review – the director assessment process is augmented by a third-party review every three years	34

Ö	Serving on other boards – we limit the number of other public company boards our directors can serve on, and serve on together	26

Ö	Director recruitment and board succession – we have term limits and a retirement policy for directors	26

Ö	Diverse board – our board has a diverse mix of skills, background and experience and 20% of director nominees are women	27

Ö	Independent advice – board committees have full authority to retain independent advisors to help them carry out their duties and responsibilities	35

Ö	Code of conduct and ethics – directors, officers and employees must comply with our code of conduct and confirm their compliance every year	23

Ö	Long-standing shareholder engagement – we communicate openly with shareholders and other stakeholders	22

Ö	Say on pay – we have held an advisory vote on our approach to executive compensation every year since 2010	6


WHAT WE DON’T DO



x		No slate voting – directors are individually elected

x		No overboarding of directors – no director sits on more than two other public company boards

x		No stock option awards for directors

2016 MANAGEMENT PROXY CIRCULAR 21

Our shareholder commitment

We believe in transparency, integrity and strong stewardship, and are committed to increasing Cameco’s value to benefit all shareholders.

Separate chair and CEO positions

Leadership starts at the top. We believe it is important to maintain separate chair and CEO positions, both of which are appointed by the board.

We have had an independent, non-executive chair of the board since 2003. We believe this provides stronger board leadership, fosters more effective decision-making, avoids conflicts of interest, and allows for more effective oversight and the ability to hold management accountable for the company’s activities.


		ACCOUNTABILITY
		ACCOUNTABILITY
The current position description for the CEO was adopted in 2012. The CEO is evaluated as part of the board survey assessment process (see page 34). The position description for the board chair describes the terms and responsibilities of that role. You can find both position descriptions on our website (cameco.com/about/governance).

Shareholder engagement

We communicate openly with shareholders and other key stakeholders, consistent with our view of maintaining engagement practices based on shareholder needs and evolving governance practices.

Our goal is to provide shareholders with clear information about our governance and compensation practices, and to continuously improve our practices and our disclosure.

We receive feedback from institutional shareholders through one-on-one or group meetings with the chair of the board and other directors and/or members of management, as appropriate, and from a formal survey by our Investor Relations department. We reply promptly to shareholder concerns and take appropriate action.


		GOVERNANCE EXCELLENCE
		GOVERNANCE EXCELLENCE
We have sound governance policies and practices. Cameco’s governance practices are available to the public on our website at cameco.com/about/governance.

Following our 2015 annual meeting, we met with Glass Lewis & Co., LLC and ISS Corporate Services (ISS), two proxy advisory firms that provide voting and other governance advice to institutional investors, to maintain a dialogue on governance and compensation matters.

COMPENSATION

We have long recognized the spotlight the investor community has put on executive compensation, the link between pay and performance and delivering value to shareholders.

We have held a ‘say on pay’ advisory vote on our approach to executive compensation every year since 2010, and have received approval ratings of over 88% every year (see page 6 for details about the advisory vote).

Accessible board

Shareholders, employees and other interested parties can write to the chair of the board, the committee chairs or the independent directors as a group.

Send your sealed envelope to our corporate office:

Cameco Corporation

2121-11th Street West

Saskatoon, SK S7M 1J3

Private and strictly confidential

Attention – Chair of the board of directors

You can use this address to write to the chair of the audit and finance committee or the human resources and compensation committee – make sure you mark on the envelope who you are directing the letter to.

Envelopes will be delivered to the appropriate party unopened.

Additional governance disclosure

The following documents are available on our website at cameco.com/about/governance:

● our governance framework

● our governance guidelines

● our code of conduct and ethics

● the mandates of the board and it committees

● definition of independent director and related definitions

● board diversity policy

● board education program

● position descriptions for the board chair and the CEO

● director and executive share ownership guidelines

● executive incentive compensation recoupment policy.

You can ask us for printed versions of these documents by writing to the corporate secretary at Cameco, 2121 – 11th Street West, Saskatoon, SK S7M 1J3.

22 CAMECO CORPORATION

Governance principles

Policies and guidelines

CODE OF CONDUCT AND ETHICS

We expect employees, officers, directors and contractors to act with honesty, integrity and impartiality to earn the trust of our shareholders, other stakeholders, customers and communities where we operate.

The code contains principles and guidelines for ethical behaviour in eight key areas:

● financial reporting and accountability

● confidentiality

● conflicts of interest

●	complying with the laws, rules and regulations that apply to us (including safety, health, environmental, import, export, securities disclosure and insider trading laws)

● corporate opportunities

● identifying and preventing fraud

● reporting illegal or unethical behaviour

● reporting violations of the code.

New employees must read the code, sign an acknowledgement that they will follow the code and disclose any conflicts of interest.

Directors, officers and employees who have management responsibilities or work in supply chain management, internal audit, investor relations, finance/treasury/tax, business technology services, marketing, corporate development, legal, human resources and executive offices must review the code every year and sign a certificate of compliance.

Employees who participate in the annual certification process agree to communicate the code’s importance and mandatory adherence to all team members.

Directors must declare any conflicts of interest and excuse themselves from any discussions or decisions where their business or personal interests would create a conflict of interest.


		CODE OF CONDUCT AND ETHICS
		CODE OF CONDUCT AND ETHICS
You can find a copy of the code on our website (cameco.com/about/governance/code-of-conduct).

Employees and other stakeholders can report a concern about inappropriate business conduct confidentially and anonymously through our ethics (whistleblower) hotline or online. We implemented the hotline in 2006 and a web-based training and compliance tool in 2012.

Any potential concerns are reported to management’s conduct and ethics committee. The audit and finance committee reviews concerns relating to senior management and directors. The management conduct and ethics committee reviews all other concerns.

COMPLIANCE

We are a public company and our shares trade on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

We comply with applicable corporate governance guidelines and requirements in Canada and the United States, including:

●	the corporate governance standards that apply to Canadian companies listed on the TSX

●	the requirements of the Sarbanes-Oxley Act of 2002 (SOx)

●	the NYSE corporate governance standards that apply to foreign private issuers registered with the Securities and Exchange Commission (SEC) in the US.

We also voluntarily comply with most of the NYSE corporate governance standards that apply to US issuers, with the following exceptions:

●	director independence standards: we generally comply with the NYSE standards, but in some cases we may determine that a director is independent when only the Canadian independence standards are satisfied

●

shareholder approval of equity compensation plans: we comply with the TSX rules, which require shareholders to approve equity compensation plans only if they involve newly issued securities. The NYSE standards require shareholders to approve the plans and any material revisions, whether or not the securities issued under the plans are newly issued or purchased on the open market, subject to a few limited exceptions.

GOVERNANCE GUIDELINES

The board has formal governance guidelines that set out our approach to governance and the board’s governance role and practices. The guidelines ensure we comply with the legal requirements and standards listed above, conduct ourselves in the best interests of Cameco and meet industry best practices. The guidelines are reviewed and updated regularly and are available on our website (cameco.com/about/governance/governance-guidelines).

INDEPENDENCE

We believe that a substantial majority of our directors must be independent for the board to be effective and that the audit and finance committee, human resources and compensation committee and nominating, corporate governance and risk committee must be 100% independent. The majority of our directors are unrelated to Cameco.


		WHAT IT MEANS
		WHAT IT MEANS
A director is independent if he or she does not have a direct or indirect material relationship with us. A relationship is material if it could reasonably interfere with a director’s ability to make independent decisions, regardless of any other association he or she may have.

2016 MANAGEMENT PROXY CIRCULAR 23

Our independence criteria meets the standards of the Canadian Securities Administrators as set out in Multilateral Instrument 52-110 – Audit Committees, National Policy 58-201 – Corporate Governance Guidelines and the NYSE corporate governance standards, including the NYSE standards on independence of human resources committee members introduced in 2013.

We review our independence criteria and director status every year, and you can find our complete definition of independence on our website (cameco.com/about/governance/governance-guidelines).

Independent chair

The board appoints the independent chair to help it function independently of management. We have had a non-executive, independent chair of the board since 2003.

The chair has various duties and responsibilities:

●	leading, managing and organizing the board consistent with our approach to governance

●	encouraging high performance and commitment of all directors

●	presiding as the chair at all board and shareholder meetings

●	overseeing the board’s strategic focus to ensure that it represents Cameco’s best interests

●	helping to set the tone and culture of Cameco

●	overseeing the board’s procedures so it can carry out its work effectively, efficiently and independently of management

●	overseeing all board matters so they are properly addressed and brought to resolution as required

●	requiring any matters delegated to the board committees to be properly carried out

●	acting as the liaison between the board and the CEO and providing advice, counsel and mentorship to the CEO

●	meeting with shareholders and other stakeholders as requested by the CEO

●	participating in the recruitment and orientation of new directors

●	requiring Cameco to provide timely and relevant information and access to other resources to support board work.

You can access a copy of the chair’s position description on our website (cameco.com/about/governance/chairs-role).

DISCLOSURE

We are committed to communicating openly and on a timely basis with shareholders, employees and the public, and providing complete, accurate and balanced information in our disclosure documents.

The audit and finance committee is responsible for reviewing our disclosure controls and procedures once a year and recommending any changes to the board for approval.

Our disclosure committee includes members of senior management and is responsible for:

●	reviewing all news releases and public filings containing material information prior to their release

●	evaluating the design and effectiveness of our disclosure controls and procedures to make sure they continue to provide reasonable assurance that information is gathered promptly and accurately, so we can make appropriate public disclosure that complies with legal requirements

●	providing regular updates to the audit and finance committee.

Each board committee reviews the material public disclosure relevant to its mandate before the board considers it for approval:

●	the audit and finance committee reviews the annual and interim financial statements, management’s discussion and analysis (MD&A) and related news releases

●	the safety, health and environment committee reviews the sustainable development report

●	the reserves oversight committee reviews the reserve and resource information

●	the human resources and compensation committee and the nominating, corporate governance and risk committee review this management proxy circular.

The board also reviews and approves the following publicly-filed documents:

●	prospectuses

●	annual information forms

●	US Form 40-F filings

●	other disclosure documents that must be approved by the directors according to securities laws, securities regulations or stock exchange rules.

The CEO and the CFO meet regularly with investment analysts and institutional investors. Our website (cameco.com) has information for shareholders, investment analysts, the media and the public, and our Investor Relations department also provides information to shareholders and responds to general questions or concerns.

You can contact our Investor Relations department by:

phone:

306.956.6340

fax:	306.956.6318

email:

go to the Contact section of our website and complete the email form.

24 CAMECO CORPORATION


About the board
The board is responsible for overseeing management and our strategy and business affairs. Its goal is to ensure we operate as a successful business, optimizing financial returns while effectively managing risk. The board encourages open dialogue and works within a climate of respect, trust and candour. It fulfills its duties by: ● maintaining a governance framework that establishes broad areas of responsibility and has appropriate checks and balances for effective decision-making and approvals ● making decisions that set the tone, character and strategic direction for Cameco ● approving the vision, mission, value statements and enterprise-level policies developed by management ● regularly monitoring management, including its leadership, recommendations, decisions and execution of strategies to ensure that they carry out their responsibilities and deliver shareholder value.		The board carries out its responsibilities directly and through its five standing committees. This provides proper oversight and accountability for specific aspects of governance, risk and Cameco’s business activities and affairs, and frees up the board to focus more on our strategic priorities, broader oversight of enterprise risk and other matters (see Role of the board and Board committees beginning on pages 31 and 35). The board and committees meet in camera without management present at all meetings, including those by teleconference. Independence All of the nominated directors are independent, except for Tim Gitzel and Donald Deranger (see page 23 for a discussion of our independence principles). Tim Gitzel is not independent because he is our president and CEO. Donald Deranger is the non-executive chair of the board of Points Athabasca Contracting Limited Partnership (Points Athabasca), a northern Saskatchewan aboriginal contractor that does business with Cameco in the region. Donald is not currently employed by Points Athabasca, but has close ties because he was their president prior to May 2013. Donald brings a deep understanding of the culture and peoples of northern Saskatchewan, and a valuable mix of skills and experience as an aboriginal and business leader with direct experience in governance, employee training, economic development and uranium mining. He is also an acknowledged leader in the Saskatchewan aboriginal community. The board values the contributions of a director with aboriginal heritage because our richest resources are near aboriginal communities in northern Saskatchewan. Donald discloses any business relationships to the board that would present a conflict of interest and does not participate in board discussions or decisions about Points Athabasca. In 2015, we paid Points Athabasca $24 million for construction and contracting services. BOARD CHAIR SELECTION Neil McMillan became our independent, non-executive chair of the board in 2013. He has been a member of the board since 2002 and has diverse experience through his work in mining, government relations and the investment industry and as a former CEO. In 2011, the nominating, corporate governance and risk committee developed a position description, list of preferred characteristics and qualities and selection process for the board chair position. A selection committee was formed in 2012 to consider potential candidates for an incoming chair since Victor Zaleschuk planned to step down as chair in May 2013. The board voted and selected Neil McMillan as the new chair. You can read more about the board chair in his director profile on page 11. His letter to shareholders begins on page 1.

	2015 BOARD PRIORITIES
	2015 BOARD PRIORITIES
The board focused on five priorities in 2015: Strategy ● The board devoted a significant amount of time to strategy, including sessions at each regular board meeting and two in-depth strategy sessions in 2015. Our strategic focus continues to be on creating value by focusing on our tier-one assets, being prudent in our decision making and managing our strategic risks Risk oversight ● The board and committees held regular in-depth discussions with management on our enterprise risks and risk mitigation strategies Governance ● Reviewed board chair succession and implemented a five-year term limit for the position ● Confirmed the board interlock policy in the governance guidelines Board renewal ● Oversaw the review of board composition in light of upcoming director retirements ● Oversaw the director search process and appointed Don Kayne to the board effective January 1, 2016 Executive compensation ● Oversaw the comprehensive review of executive compensation led by the human resources and compensation committee ● Reviewed and approved the committee’s recommended changes, which reinforce the link between pay and performance, align more closely with the median of the market, mitigate risk and support good governance generally ● Reviewed and approved the committee’s recommendations on executive pay for 2015 The board met 10 times in 2015. You can read about the committees’ activities in 2015 starting on page 36.

2016 MANAGEMENT PROXY CIRCULAR 25

When considering potential board chair candidates, the selection committee considers the ideal characteristics and qualities for the role, the position description and the experience and qualifications of potential candidates. It looks specifically at each candidate’s leadership and communication skills, business and industry experience, capacity and availability in combination with Cameco’s strategic direction and opportunities and risks.

The committee also consults with the CEO because the relationship between the board chair and the CEO is an important consideration.

Tenure

The nominating, corporate governance and risk committee reviewed and revised the board’s policy on tenure and retirement in 2014 to ensure that the policy, the annual review of board composition and the succession planning process provide for board refreshment that meets our ongoing needs.

TERM LIMITS AND RETIREMENT

The board recognizes the need to balance the benefits of experience and the need for new perspectives.

As of 2016, directors will not be re-nominated for election at an annual meeting after completing 15 years of continuous service or after they turn 72, whichever is earlier. In exceptional circumstances, if it is in Cameco’s best interest, the board has the discretion to nominate a director for re-election for an additional one-year term after age 72 or 15 years of board service.

The term of service of the board chair will be five years regardless of age or length of service.

The CEO typically resigns from the board when he retires from Cameco.

Our nominated directors (not including Tim Gitzel) have an average tenure of 6.6 years.

LOGO

Our expectations for directors

We expect each member of the board to act honestly and in good faith, and to exercise business judgment that is in Cameco’s best interest. We expect directors to bring their skills, experience and functional expertise to the board and to draw on a variety of resources to support their decision-making, including materials prepared by management, their own research and business experience, independently-prepared media reports on Cameco and the industry and knowledge gained from serving on other boards.

We also expect each director to:

● comply with our code of conduct and ethics

● promptly report any perceived, potential or actual conflicts of interest

● develop an understanding of our strategy, business environment, operations, performance, financial position and the markets we operate in

● diligently prepare for each board and committee meeting

● attend all board meetings, their committee meetings and the annual meeting of shareholders

● actively participate in each meeting, and seek clarification from management and outside advisors to fully understand the issues

● participate in our board education program

● participate in the board, committee and director assessment process.

AVOIDING CONFLICTS OF INTEREST

Directors seek to avoid situations where their interests might conflict with their duty to act in Cameco’s best interest.

Each director must promptly report a potential, perceived or actual conflict of interest to the corporate secretary, who maintains a list of issues and monitors them on an ongoing basis.

If necessary, consultations with legal counsel will occur to determine whether the director has a conflict. Directors who have an actual or potential conflict of interest do not participate in any related discussions or decisions and the corporate secretary helps identify when action may be desirable based on the list of potential conflict situations.

The nominating, corporate governance and risk committee reviews the list as well as a report on actual and potential conflicts of interest before making recommendations respecting the nomination for directors for election by shareholders.

SERVING ON OTHER BOARDS

Our directors do not serve on the boards of competitor firms, and they cannot join organizations or groups that may have adverse interests, unless they have the board’s permission.

A director who is an active CEO can serve on a total of three public company boards, including their own board and the Cameco board. Other directors can serve on a total of five public company boards, including the Cameco board. We impose these limits because of the increasing demands on directors of public companies and to avoid overboarding by directors.

26 CAMECO CORPORATION


During their annual interviews with the chair of the nominating, corporate governance and risk committee, each director’s capacity to handle the workload of the board and their commitment to the board is discussed. Our CEO can only join the board of another public company with the consent of our board. It approved Tim Gitzel’s appointment to the board of The Mosaic Company in October 2013. A director can temporarily exceed the limit by one directorship if they have declared an intention to resign from, or not stand for re-election to, at least one other board as of that company’s next annual general meeting. Directors must advise the chair of the board and chair of the nominating, corporate governance and risk committee if they are considering a directorship with another public company. No directors currently exceed the limit. Members of the audit and finance committee cannot serve on the audit committees of more than two additional public companies, without the board’s approval.		(see page 30) and as part of the annual evaluations of board and committee performance and effectiveness. The board adopted a formal diversity policy in February 2014, and refined it in December 2014. We recently joined the Canadian Board Diversity Council, an organization that works to advance diversity on the boards of Canadian companies, as part of our support of Canadian diversity initiatives that include increasing the number of female directors on boards. FEMALE REPRESENTATION The board recognizes the importance of gender diversity, and our diversity policy requires at least 25% of directors to be women. We currently have three female directors, representing 27.3% of the board. Nancy Hopkins is not standing for re-election at the 2016 AGM and the board is conducting a search for a new female director. See director recruitment and board succession on page 30. The graph below shows the gender breakdown of this year’s nominated directors. ABORIGINAL REPRESENTATION The board is committed to building long-lasting and trusting relationships with communities where we operate, and a significant portion of Cameco’s operations are in northern Saskatchewan. Our diversity policy requires at least one director to have an aboriginal background and be from Saskatchewan to bring an understanding of the culture, heritage, values, beliefs and rights of the local indigenous peoples to the board. GEOGRAPHIC REPRESENTATION The board also understands the importance of having directors with experience in jurisdictions where we operate or do business, and believes that directors can bring this experience without actually living there. Our diversity policy requires the board to have directors with extensive experience in geographical areas where Cameco has or anticipates having significant business interests. Don Kayne was appointed to the board in January 2016. Don brings extensive experience in the emerging Asian markets, including China. Our board is subject to the terms of the Investment Canada Act and the Uranium Non-Resident Ownership Policy, which require at least two-thirds of our directors to be Canadian citizens, and the Canada Business Corporations Act, which requires at least half of our directors to be Canadian residents.
	BOARD INTERLOCKS
	BOARD INTERLOCKS
No more than two directors may serve together on the board of another public company, and directors may not serve together on the boards of more than two other public companies (each, a board interlock). We have no board interlocks.
CHANGE IN POSITION If a director’s principal occupation or business association changes substantially, the director is required to promptly offer his or her resignation to the board chair. Jim Gowans’ principal occupation changed from co-president to senior advisor to the board chair of Barrick Gold Corporation in August 2015 and to president and CEO and a director of Arizona Mining Inc. effective January 1, 2016. He promptly offered his resignation to Cameco in November 2015 as a result of these changes. The nominating, corporate governance and risk committee considered the change in job responsibility and recommended that the board not accept his resignation because of his extensive mining, exploration and international experience, the valuable contributions he makes to the board and his commitment to Cameco board work. Board diversity We have long believed that a board with a diverse mix of skills, backgrounds, experience, gender and age, that also reflects the evolving demographics and geographic areas where we carry out business, is important for sound decision-making and good governance. The nominating, corporate governance and risk committee reviews board diversity every year as part of its review of our competency matrix (see page 28). It recommends measurable objectives for enhancing diversity, including objectives for female, aboriginal and geographic representation and age. The committee reviews our progress in achieving these objectives and also refers to the objectives when selecting new director candidates

2016 MANAGEMENT PROXY CIRCULAR 27

AGE

While the board recognizes the correlation between age and experience, it believes that directors of different ages bring a wider range of viewpoints. Our diversity policy requires the board to represent a range of ages. The graph below shows the age diversity of this year’s nominated directors.

LOGO

Skills, attributes and experience

A board that has certain core qualities and a broad mix of skills and experience is best equipped to oversee our strategic direction, understand issues that can arise with a company of our size and complexity, and make informed decisions.

CORE ATTRIBUTES

We expect every Cameco director to possess nine core attributes that are fundamental to serving on our board:


BUSINESS JUDGMENT	INTEGRITY AND ACCOUNTABILITY	ENGAGEMENT
Track record of leveraging experience and wisdom in making sound strategic and operational business decisions. Demonstrates business acumen and a mindset for risk oversight.	Demonstrates good character and insists on high ethical standards, recognizes and avoids potential and actual conflicts of interest, maintains strict confidentiality, is accountable for board decisions, acts in Cameco’s best interests and maintains public confidence and goodwill of Cameco’s shareholders and other stakeholders.	Actively participates in meetings and develops a strong understanding of Cameco’s business. Demonstrates an information-seeking orientation and knowledge of current issues and trends respecting public companies. Exhibits familiarity with international, national and local affairs.
COMMITMENT	TEAMWORK	COMMUNICATION
Availability and willingness to travel, attend and contribute to board and committee functions and take leadership roles as required.	Demonstrates perception, acuity, tact and rapport to build constructive working relationships and dynamics that engender mutual trust, respect and contribution. Demonstrates an orientation toward resolving differences of opinion, forging consensus, reaching solutions and maintains resiliency and composure under difficult circumstances.	Ability to listen carefully, raise questions constructively and encourage and build upon open discussion of key issues.
INDEPENDENT-MINDEDNESS	FINANCIAL LITERACY	RECORD OF ACHIEVEMENT
Willingness to formulate or maintain one’s own views and to challenge the prevailing opinion.	Ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by Cameco’s financial statements. Knowledge of IFRS and an understanding of internal controls and procedures for financial reporting.	Has a history and reputation of achievement that demonstrates the ability to perform at the highest level and that reflects high standards for one’s self and for others.

COMPETENCY MATRIX

The board uses a competency matrix to assess composition and ensure it has an appropriate mix of skills and competencies to govern effectively and be a strategic resource for Cameco.

Competency matrix review

The nominating, corporate governance and risk committee reviews director competencies every year to ensure they continue to meet Cameco’s needs. In 2015, the committee reviewed the list of competencies and recommended further changes which were approved by the board:

● the board, corporate governance and risk oversight competency was split into two competencies – board/corporate governance and risk oversight – to recognize them as distinct competencies

● the matrix was refined to more appropriately reflect the importance of risk oversight because of the increased focus on risk by the board

● the board also made legal/regulatory expertise a separate competency because of its importance.

The nominating, corporate governance and risk committee reviews the skills and diversity of the board every year.

28 CAMECO CORPORATION

The table below shows the current categories of essential skills and experience, their descriptions, and the number of nominated directors who have indicated their level of knowledge in each category. Every year directors assess their level of expertise on each competency in the matrix using the following guidelines:

● Expert – considerable depth and breadth of experience

● Strong working knowledge – has some related managerial or board experience in this area

● Basic level of knowledge – basic knowledge gained through day-to-day activities.


SKILLS AND EXPERIENCE DESCRIPTION	EXPERT	STRONG WORKING KNOWLEDGE	BASIC LEVEL OF KNOWLEDGE

Board / corporate governance Prior or current director of a major organization with mature governance practices	6	4	0

Risk oversight Experience in risk governance, including monitoring both strategic and operational / compliance risks	5	5	0

Capital projects Experience overseeing and evaluating large capital projects and in project management	3	4	3

Enterprise leadership Experience, whether as a prior or current CEO or senior officer or otherwise, of a large public company or major organization with a track record of value creation and successful implementation of strategic direction	6	3	1

Financial acumen Experience, whether as a professional accountant, CFO or otherwise, in financial accounting and reporting, including internal controls, IFRS, evaluation of financial statements and corporate finance	4	5	1

Legal / regulatory Experience ensuring compliance with laws, regulations and business rules	2	6	2

Investor relations Experience with, or strong understanding of, the perspectives of major, long-term and other investors, capital markets, and the investment community, both domestically and internationally, and in shareholder engagement	4	6	0

Stakeholder relations/government/public policy Experience in, or a strong understanding of, the workings of government and public policy both domestically and internationally, and in stakeholder engagement or management	5	3	2

Human resources and executive compensation Thorough understanding of executive compensation, the oversight of succession planning, talent development and retention, and pension programs	7	2	1

Uranium / nuclear Strong knowledge of markets, competitors, business issues and imperatives, and the domestic and international regulatory environment	2	5	3

International Experience with, or strong understanding of, international operations, economics, commodity trading and geo-politics, preferably in countries or regions where we have or are developing operations	5	4	1

Investments / mergers and acquisitions Experience in the field of investment banking or with mergers and acquisitions, evaluation of investment strategy, and capital allocation, structure and markets	3	7	1

Mining, exploration and operations Experience with a leading mining or resource company with reserves, technology, exploration and operations expertise	3	4	3

Operational excellence Experience in a complex chemical or nuclear operating environment, creating and maintaining a culture focused on safety, the environment and operational excellence	3	1	6

Safety, health and environment / corporate responsibility Experience in, or strong understanding of, leading safety, health and environmental practices, associated risks and regulatory requirements, and in sound corporate responsibility and sustainable development practices, advocacy and reporting	4	4	2

2016 MANAGEMENT PROXY CIRCULAR 29

Director recruitment and board succession

The nominating, corporate governance and risk committee is responsible for overseeing board succession. It reviews the director competency and attribute matrix regularly to ensure that the board has the right mix of diversity, skills and experience. It also monitors upcoming director retirements to ensure that gaps are filled in a timely manner. The committee keeps an evergreen list of suitable candidates based on their skills, experience, character, integrity, judgment, record of achievement, diversity and other qualities or qualifications that would enhance overall composition of our board and its oversight capabilities.

The committee is responsible for recruiting new directors. In 2015, it led a search for a Canadian director with strong international acumen, specifically in emerging markets where Cameco does business. This search resulted in the appointment of Don Kayne to the board on January 1, 2016. The committee is currently leading another search for a female director from the US with nuclear industry experience and other key criteria that the board has identified. We anticipate that the board will appoint this new director in 2016, and that she will be brought forward for nomination at the next annual general meeting. Four non-executive directors have joined the board in the last five years, increasing the board’s diversity and broadening its skills in finance and investment banking, mergers and acquisitions, marketing and sales, and mineral resource estimation. The new directors have also brought senior leadership (CEO) experience and experience in mining and exploration, the nuclear industry and international business.

The committee follows established guidelines and procedures for recruiting and selecting the best candidates. For the 2015 director candidate search, and the search currently underway, an external search firm has been utilized to ensure a wide net is cast to bring the best candidates forward. The committee follows a tiered interview process to determine the most suitable candidates. The committee approves the list of candidates to be interviewed and then a selection committee consisting of the chair of the board, chair of the committee and the chief executive officer interviews the candidates. If necessary, and in the case of the most recent appointment, further interviews may be conducted by the nominating, corporate governance and risk committee and the chairs of the other board committees.

The board may also recruit potential directors from time to time to fill specific needs.

30 CAMECO CORPORATION

Role of the board


The company articles require our board to have at least three directors and no more than 15. The board has decided that 10 directors are to be elected at this year’s annual meeting.		The board must approve several kinds of decisions, including: ● operating expenditures that exceed the total operating budget by more than 10% ● unbudgeted project expenditures over $10 million per transaction, or over $50 million in total per year ● cost overruns on budgeted project expenditures that are more than $15 million per transaction, or over $50 million in total per year ● any acquisition or disposition of assets over $10 million per transaction, or over $50 million in total per year. The CEO position description is available on our website (cameco.com/about/governance/ceos-role). STRATEGIC PLANNING The board oversees the planning, progress and fulfillment of our strategic goals. The board is actively involved in the annual strategic planning process and sets aside time at each meeting to discuss strategy with management and monitor our progress. Board members discuss and analyze the main risks facing our business, strategic issues, competitive developments and corporate opportunities. The board also discusses possible adjustments to the strategic plan in light of our progress and the current business environment. The board measures success and fulfillment of our strategic plan by assessing our performance results against the annual corporate objectives. The board committees are also involved in the strategic planning process: ● the audit and finance committee reviews and makes recommendations on our three-year plans (current year annual budgets and additional two-year financial plans) and the corporate opportunities relating to the strategic plan ● committees review the annual corporate objectives that relate to their specific area of oversight ● the nominating, corporate governance and risk committee oversees the enterprise risk management (ERM) program, including management processes and action plans to mitigate strategic risks (see Risk oversight below). RISK OVERSIGHT The board believes that risk oversight is a primary responsibility of the board. The board has demonstrated this by dedicating time at board and committee meetings to risk oversight including the identification, management, reporting and mitigation of risk. The board oversees our strategic risks and our top-tier risks are assigned to the board committees for ongoing oversight. The following table shows how the board and committees monitor risk across the organization. You can read about the board committees beginning on page 35 and compensation risk on page 41.
	ABOUT OUR BOARD MEETINGS
	ABOUT OUR BOARD MEETINGS
	The board engages in lively debate on strategy and items of business, challenging management in a constructive and healthy manner. The board considers the interests of shareholders, debt holders, customers, employees, communities where we operate, governments, regulators, the general public and the environment when making business decisions.
MANDATE The board has a formal mandate (see Appendix B) that lists its specific duties and responsibilities including the following, among others: ● selecting, evaluating and, if necessary, terminating the CEO ● assessing the integrity of the executive officers and ensuring there is a culture of integrity throughout Cameco ● adopting an annual strategic planning process that includes approving the strategic plans and monitoring our performance against those plans ● succession planning and monitoring management’s performance and compensation ● approving policies and procedures to manage our risks and overseeing management’s efforts to mitigate material risks. The board reviews its mandate annually and updated it in February 2015. Each board committee has a mandate that lists the responsibilities and duties of the committee and chair (see Board committees beginning on page 35). OVERSEEING THE CEO The CEO is appointed by the board and is responsible for managing Cameco’s affairs. This includes articulating our vision, focusing on creating value for shareholders, and developing and implementing a strategic plan that is consistent with the corporate vision. Our annual objectives become the CEO’s mandate from year to year, and they include specific, quantifiable goals. The CEO’s objectives are reviewed by the human resources and compensation committee and approved by the board. The CEO is accountable to the board and committees, and the board conducts a formal review of his performance every year. The human resources and compensation committee reviews and discusses the results of the formal review, followed by a discussion with the board. Then the board chair meets with the CEO to discuss the results. The board has established clear limits of authority for the CEO, and these are described in our delegation of financial authority policy.

2016 MANAGEMENT PROXY CIRCULAR 31


BOARD OF DIRECTORS		COMMITTEE AREAS OF RESPONSIBILITY

Overall responsibility for risk oversight at Cameco and specific responsibility for strategic business risks		Audit and finance committee Oversees financial risks, like hedging, tax and capital projects

		Human resources and compensation committee Oversees compensation risk, talent management risk, succession risk and cyber-security risk

		Nominating, corporate governance and risk committee Oversees governance and management to ensure we have a robust risk management process in place

		Reserves oversight committee Oversees the estimating of our mineral reserves and business-related operational risks

		Safety, health and environment committee Oversees safety, health and environmental risks and related operational risks

Our risk policy sets out a broad, systematic approach to identifying, assessing, reporting and managing the significant risks we face in our business and operations. It is reviewed annually to ensure that it continues to meet our needs.

The enterprise risk management (ERM) program involves all aspects of Cameco’s business and follows the guidance of ISO 31000:2009. We use a common risk matrix throughout the company and consider any risk that has the potential to significantly affect our ability to achieve our corporate objectives or strategic plan as an enterprise risk. We conduct a gap analysis between enterprise-level and strategic risks to further embed strategic risk into our management process. As part of the annual risk review process, management votes on the top risks to refine our focus for monitoring and reporting on risks over the next year. Management also receives and reviews monthly updates on the company’s progress in managing these top risks.

As a responsible corporation, we proactively address a range of financial, operational and other key risks and assess all risks against our four measures of success. We measure risk in five broad categories:

● Strategic

● Financial

● Operational

● Human capital

● Social, governance and compliance.

Each risk is assigned a rating and grouped into one of three tiers based on its severity or level of risk. We develop action plans to mitigate risks as part of our strategic planning and budgeting process. Employees “own” the risks and are responsible for developing and implementing controls to mitigate risk and for ongoing risk assessments.

Management presents a formal risk report to the board annually. Time is also set aside at each regular board meeting to discuss strategy, which includes strategic risk and reputational risk exposure. Management makes regular presentations throughout the year to the committees, or, in some cases, the full board to allow a fuller understanding of the enterprise risks and management’s mitigation strategies. Each committee also receives a quarterly written report on the status of mitigation activities for each risk it has been assigned.

Regular monitoring and reporting keeps management and the board apprised of our progress in mitigating risk and supports good governance.

ABOUT THE MASTERING RISK AWARD

Cameco was the winner of the 2015 Mastering Risk Award (see inside front cover) which recognized Cameco for the effectiveness of our ERM program with respect to risk identification, assessment and treatment as well as program monitoring and reporting to the board.

The award was presented by the Institute of Internal Auditors – Canada, along with Crowe Horwath.

INTERNAL CONTROLS

The board and committees are responsible for monitoring the integrity of our internal controls and management information systems.

The audit and finance committee oversees the internal controls, including controls over accounting and financial reporting systems. The internal auditor reports directly to the audit and finance committee chair and updates the committee quarterly, while the CFO makes quarterly presentations on our financial results and forecasts to the audit and finance committee and the board.

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting to provide reasonable assurance that public reporting of our financial information is reliable and accurate, our transactions are appropriately accounted for, and that our assets are adequately safeguarded. Management evaluated the effectiveness of our system of internal control over financial reporting and concluded that the system was effective in providing the reasonable assurance as at December 31, 2015.

32 CAMECO CORPORATION

SUCCESSION PLANNING AND LEADERSHIP DEVELOPMENT

The board oversees succession planning to ensure we have a pool of strong, diverse candidates for senior management positions, and that we nurture talent and attract and retain key people for our long-term success.

Our approach to leadership development focuses on building competencies throughout the organization, identifying high-potential employees and preparing them to take on executive officer roles in the future. The composition of our senior management team is a direct result of this approach.

The human resources and compensation committee reviews the succession plan for senior management every year while the audit and finance committee is responsible for reviewing the succession plan for the CFO, controller and senior finance and audit roles.

The board reviews the succession plans annually and has the opportunity to meet high-potential employees through board presentations and informal social gatherings.

Workplace diversity

We appreciate the contributions of every employee throughout the organization. We believe that a diverse workplace brings new ideas, perspectives, experiences and expertise, strengthening our ability to continue to innovate, manage change and grow as a respected industry leader. We are working hard to engage all members of our workforce so we attract and retain the best employees.

As workforce demographics shift and companies do more business on a global scale and as the expectations of the workforce change, diversity has become a necessity. As a result, the board has approved a diversity/inclusion compensable target within our corporate objectives that has three components:

● initiating a long-term diversity and inclusion plan for Cameco that outlines specific actions for management to increase diversity. This will involve, among other things, reviewing employment systems, policies and practices to identify barriers to participation and representation, removing identified barriers and creating a culture of inclusion, setting baseline and long-term participation and representation goals, and identifying quantitative and qualitative measures to assess the effectiveness of the actions undertaken

● revitalizing our commitments to the residents of Saskatchewan’s north (RSNs) by reviewing the education and experience requirements for roles, reviewing apprenticeship and workplace education programs at our northern Saskatchewan operations, and establishing accountability measures on Cameco’s RSN commitments

● completing primary research for the gender diversity project initiated by senior management in 2015 to identify common themes and workplace issues and to establish and address priority issues.

Women in leadership

Our senior vice-president and chief corporate officer, Alice Wong, has initiated group discussions with women at Cameco locations across North America and is conducting a survey among all female employees to gather information and insights. Participation is voluntary, however, we are encouraging all women to take advantage of the opportunity to participate in the group discussions and survey. Our goal is two-fold: to develop a better understanding of what is working well across Cameco and to identify issues and barriers for women.

Cameco currently has about 775 female employees across North America, representing 23% of our workforce. Over 300 have already participated in the group discussions and more than 235 have completed the survey.

GENDER DIVERSITY PROJECT

Our senior vice president and chief corporate officer, Alice Wong, has dedicated many hours conducting 35 meetings with over 300 female employees in small groups from across the organization to collect data to identify common themes and workplace issues for women.

We have one female executive officer, representing 20% of the group, and three female vice-presidents, representing 21% of our senior management team. This closely tracks the proportion of women in our overall workforce, which is 23%, and which is higher than the current participation rate of approximately 19% in the Canadian mining industry.

We do not have a formal policy or a set target for the number of female executive officers, but our current processes are helping us evaluate how to remove barriers to increase participation and representation and, ultimately, the number of women leaders. We expect the work being done on this will lead to qualitative and quantitative measures to assess the effectiveness of management’s actions. We will consider the appropriateness of adopting targets as part of these discussions and in our review of the results.

Aboriginal workforce

Cameco is Canada’s largest industrial employer of First Nations and Métis people. Aboriginal employees and contractors make up more than 47% of the workforce at our northern Saskatchewan operations. We also have a dedicated team of employees at our northern affairs office and at our satellite offices throughout northern Saskatchewan specifically working on local workforce development, including leadership development.

2016 MANAGEMENT PROXY CIRCULAR 33

ASSESSMENTS

Performance and effectiveness assessments of the board, committees and individual directors are conducted annually.

The nominating, corporate governance and risk committee oversees the survey process and works with management to ensure the survey questions are structured to receive meaningful feedback from directors. The results are used to assess the board, the CEO, the composition of the committees and meeting effectiveness, identify any gaps in skills and experience and to ensure that the board is making the best use of each director’s expertise.

Responses are confidential and tallied externally to preserve anonymity and encourage open comments and full disclosure. Individual directors are not identified in the reports, other than the director self-assessments which are reviewed by the board chair and the chair of the nominating, corporate governance and risk committee who receive the reports. Board assessment results are shared with all board members and committee assessment results are shared with all committee members.

Directors complete a self-assessment of their skills, performance and relevant experience. The nominating, corporate governance and risk committee chair or the board chair also conducts one-on-one interviews to allow directors to speak candidly about any issues or concerns relating to their performance, the performance of their peers, or the functioning of the board. The interview allows the chair to discuss capacity and commitment to the board as well as education opportunities.

The committee reviews the results of the board assessments, and makes recommendations to the board about board and/or committee composition, or changes to the structure, process or other aspects to enhance board performance.

An independent third-party review of the board, committees, and directors was implemented by the board in 2014 and will be conducted every three years. The next independent third-party review of the board, committees and directors will take place in 2017.


SURVEYS		ACTIONS

Board survey		●	nominating, corporate governance and risk committee analyzes results and prepares a summary report for the board
●	completed by all directors

Director self-evaluation		●	the nominating, corporate governance and risk committee chair and the board chair analyze results and discuss them with individual directors during their personal interviews
●	completed by all directors

Board chair evaluation		●	nominating, corporate governance and risk committee chair reviews the results and presents them to the board chair
●	completed by all directors

Committee surveys		●	each committee chair analyses the results and prepares a summary report for the committee and reports to the board
●	completed by members of each committee

Surveys of committee chairs		●	board chair reviews the results and discusses any issues raised with each committee chair
●	completed by members of each committee

CEO evaluation		●	the human resources and compensation committee reviews and discusses the results
●	completed by the non-executive directors	●	the board discusses the results and the board chair reviews them with the CEO

34 CAMECO CORPORATION

Board committees

The board carries out its responsibilities directly and through its five standing committees:

● audit and finance

● human resources and compensation

● nominating, corporate governance and risk

● reserves oversight

● safety, health and environment.

The committee structure ensures directors can devote the requisite skills, time and attention to specific matters and supports the board in effectively overseeing our business and affairs and providing sound governance generally.

Three committees – audit and finance, human resources and compensation and nominating, corporate governance and risk – are 100% independent.

COMMITTEE RESPONSIBILITIES

Each board committee was formed based on the need for detailed oversight in key areas. Each committee has a mandate outlining the responsibilities and duties of the committee and its chair. You can find a copy of the mandates on our website (cameco.com/about/governance/board-committees).

Each committee fulfills a governance role and develops an annual work plan for the year that sets out its priorities and activities and oversight of particular risks.

Committee work supports our four measures of success. We assess corporate performance based on how well we achieve both financial and operational goals, which are tied to our four measures of success (see pages 63 and 71 through 73).

MEASURE OF SUCCESS

COMMITTEES RESPONSIBLE

Outstanding financial performance

Audit and finance

Supportive communities

Audit and finance

Safety, health and environment

Human resources and compensation

Safe, healthy and rewarding workplace

Safety, health and environment

Human resources and compensation

Clean environment

Safety, health and environment

Each committee chair is responsible for determining the meeting agenda, how often the committee will meet, the conduct of each meeting, and for chairing their committee meetings, as set out in each committee mandate.

Every year each committee conducts a formal self-assessment and reviews its performance against the committee’s mandate.

COMMITTEE MEMBERSHIP

Committee membership is reviewed after a new board is elected and when changes are appropriate. We strive for periodic rotation of committee members but it is not mandated because there may be reasons to keep an individual director on a certain committee for a longer period. Changes are based on the recommendations of the chair of the board and the chair of the nominating, corporate governance and risk committee.


		MORE ABOUT BOARD COMMITTEES
		MORE ABOUT BOARD COMMITTEES
		Each committee reviews its mandate annually. Each committee sets aside time at each meeting to meet in camera without management present, and reports the business of its meetings to the board in a timely manner. You can read a report from each committee starting on the following page.

Committee chair rotation

We have a committee chair rotation policy that calls for rotating the positions every five years.

Two committee chairs were changed in 2015. Jim Gowans took on the chairperson role for the safety, health and environment committee and Catherine Gignac assumed the chairperson role for the reserves oversight committee. New chairs will be appointed to the nominating, corporate governance and risk committee and the human resources and compensation committee following the retirements of the chairs of those committees.

Changes to the committee chairs and committee memberships must be made in a way that balances continuity and the need for fresh ideas, while recognizing each director’s particular areas of expertise.

CROSS-COMMITTEE ATTENDANCE

An informal invitation is extended to all directors to attend any board committee meeting. All directors have a standing invitation to attend the financial oversight portion of each audit and finance committee meeting.

Members of the audit and finance committee attend the portion of the human resources and compensation committee meeting on the finance succession plan, which includes the CFO and senior finance personnel.

The chair of the safety, health and environment committee attends the portion of the human resources and compensation committee meeting when it reviews that aspect of our annual corporate performance.

The chair of the reserves oversight committee attends the audit and finance committee meeting to report on annual reserves and resources.

ACCESS TO MANAGEMENT AND OUTSIDE ADVISORS

The board and committees can invite any member of management, outside advisor or other person to attend their meetings.

Committees can engage outside advisors to assist in carrying out their duties, as authorized by their mandates. Individual directors can also engage outside advisors, as long as they receive approval in advance from the nominating, corporate governance and risk committee. The human resources and compensation committee and the nominating, corporate governance and risk committee each engaged an independent consultant in 2015.

2016 MANAGEMENT PROXY CIRCULAR 35

Audit and finance committee



MEETINGS IN 2015: 7 The committee met separately with the internal auditor and external auditors at every regular meeting. MEMBERS John Clappison (chair since May 2009) Ian Bruce Daniel Camus Catherine Gignac Nancy Hopkins Neil McMillan (ex-officio) There we no membership changes in 2015. 100% INDEPENDENT All members are independent and financially literate John Clappison and Ian Bruce are the audit and finance committee’s financial experts because they have accounting or related financial expertise and meet the necessary requirements under US securities laws. Daniel Camus also qualifies as a financial expert given his experience. None of the committee’s members serve on the audit committee of more than two other public companies. The committee reviewed its mandate and is satisfied that it carried out its duties and responsibilities.				KEY RESPONSIBILITIES
				The audit and finance committee supports the board in fulfilling its oversight responsibilities regarding the integrity of our accounting and financial reporting; the adequacy and effectiveness of our internal controls and disclosure controls; legal, regulatory and ethical compliance; the independence and performance of our external and internal auditors; oversight of specific risks; and prevention and detection of fraudulent activities and financial oversight.
				2015 COMMITTEE HIGHLIGHTS
				Financial reporting
				● oversaw the quality and integrity of our accounting and financial reporting processes
				● reviewed and recommended the annual and quarterly financial statements and MD&A and quarterly press releases to the board for approval
				● consulted with the human resources and compensation committee regarding the CFO and controller succession plans
				Internal controls
				● reviewed the effectiveness and integrity of our internal control systems and disclosure controls
				External audit
				● approved the annual audit plan and the external auditors’ fees, including pre-approval of all services to be provided. See page 5 for a description of the services provided by the external auditor and the fees paid to them in 2015
				● received regular reports from the external auditor on the audit of our financial statements
				● assessed the performance of the external auditor
				● reviewed the auditor’s qualifications, independence and depth of business and industry knowledge and recommended the appointment of our external auditor for the coming year
				● regularly met with the external auditor without management present
				Internal audit
				● assessed the internal auditor, approved revisions to the internal audit mandate and approved the internal audit plan for the year
				● received regular reports from the internal auditor on the fulfillment of its plan and its recommendations to management
				● regularly met with the internal auditor without management present
				Compliance
				● reviewed reports about our compliance programs, including the code of conduct and ethics and our international business conduct (anti-corruption) compliance program
				● reviewed related-party transactions and political and charitable donations
				● received briefings on the OECD’s base erosion and profit shifting requirements (BEPS)
				● reviewed policies and programs to monitor compliance with legal and regulatory requirements
				● received briefings and reports on management’s hedging, debt and credit policies and compliance with them
				● received and reviewed quarterly litigation reports
				Risk oversight
				● received five management presentations on enterprise risks that the committee oversees
				● received quarterly updates on the status of mitigation plans pertaining to the risks that the committee oversees (including financial, fraud and other material risks within the committee’s mandate)
				Financial oversight
				● received and reviewed reports on our insurance program, directors’ and officers’ liability insurance and indemnity agreements
				● received and reviewed the annual supply chain management report
				● received regular reports from NUKEM on its trading activities
				● received and reviewed reports on the company’s funding including finance and cash flow planning

36 CAMECO CORPORATION

Human resources and compensation committee



MEETINGS IN 2015: 6 MEMBERS James Curtiss (chair since May 2002) Ian Bruce Daniel Camus Anne McLellan Neil McMillan (ex-officio) Joe Colvin and Vic Zaleschuk left the committee in May 2015. 100% INDEPENDENT The committee also has an external consultant who provides independent advice on executive compensation matters. Meridian Compensation Partners (Meridian) has been the committee’s consultant since December 2011, and it has not provided any services to management. The committee reviewed its mandate and is satisfied that it carried out its duties and responsibilities.				KEY RESPONSIBILITIES The human resources and compensation committee supports the board in fulfilling its oversight responsibilities regarding human resource policies, executive compensation and executive succession and development. 2015 COMMITTEE HIGHLIGHTS A letter from the chair of the human resources and compensation committee begins on page 47. Compensation governance ● monitored compensation trends and emerging issues ● reviewed ‘say on pay’ results ● reviewed all aspects of our director and executive share ownership guidelines, including compliance ● selected and managed the committee’s independent compensation consultant, approved its work plan, qualifications and fees and considered its independence ● reviewed the compensation disclosure in this circular Executive and director compensation ● participated in a comprehensive review of the executive compensation program ● approved executive compensation, including compensation philosophy, comparator group and the incentive plans and other program components and established the overall approach, pay mix, target awards and allocation of long-term incentive awards ● oversaw our director compensation program Succession planning ● oversaw the succession planning process and reviewed the executive talent pool Risk oversight ● received management presentations on enterprise risks that the committee oversees ● received quarterly status updates on the mitigation plans pertaining to the risks that the committee oversees (including compensation risk, third-party compensation risk assessments, talent management risk, succession risk, cyber-security risk and other material risks within the committee’s mandate) Pension plan governance ● oversaw pension plan governance and management’s supervision of our pension plan


Nominating, corporate governance and risk committee

MEETINGS IN 2015: 7 MEMBERS Nancy Hopkins (chair since May 2009) John Clappison James Curtiss Anne McLellan Neil McMillan (ex-officio) Vic Zaleschuk left the committee in May 2015. 100% INDEPENDENT The committee reviewed its mandate and is satisfied that it carried out its duties and responsibilities.				KEY RESPONSIBILITIES
				The nominating, corporate governance and risk committee supports the board in fulfilling its oversight responsibilities by developing and recommending a set of corporate governance principles, identifying and recommending director candidates and overseeing risk management.
				2015 COMMITTEE HIGHLIGHTS
				Corporate governance
				● monitored governance trends and emerging issues
				● reviewed revisions to our governance guidelines, including the addition of policies related to board interlocks and board chair tenure, and recommended approval to the board
				● reviewed director independence and conflicts of interest
				● assessed the size, composition and mandates of the board and board committees
				● reviewed and updated the competency and attribute matrices
				● reviewed the board’s diversity policy and tenure
				● oversaw our director education program
				Director recruitment
				● oversaw the director selection process, including identification of selection criteria, selection of a director search firm and review and approval of interview candidates
				● recommended Don Kayne as a new director, who was appointed January 1, 2016
				Risk oversight
				● oversaw our risk management process and policies
				● oversaw management of our risk profile and risk tolerance associated with our strategy and corporate objectives
				Board and committee assessments
				● evaluated the performance and effectiveness of the board and directors based on the annual assessment results (no material issues were raised as part of this process)
				● reviewed committee composition

2016 MANAGEMENT PROXY CIRCULAR 37

Reserves oversight committee



MEETINGS IN 2015: 3 The committee also met separately with the leading qualified person at every meeting. MEMBERS Catherine Gignac (chair since May 2015) Ian Bruce Donald Deranger Jim Gowans Neil McMillan (ex-officio) Catherine Gignac became the chair and Jim Gowans continued as a member in May 2015. Three of the four members are independent The committee reviewed its mandate and is satisfied that it carried out its duties and responsibilities.				KEY RESPONSIBILITIES
				The reserves oversight committee supports the board in fulfilling its oversight responsibilities regarding estimating and disclosing mineral reserves and resources.
				2015 COMMITTEE HIGHLIGHTS
				Estimating mineral reserves and resources
				● confirmed our designated qualified persons for estimating our mineral reserves and resources
				● performed the due diligence process for the year-end reserves and resource reporting
				● reviewed management’s annual reserve and resource report and annual reconciliation of reserves to mine production and recommended them to the board for approval
				● reviewed material changes to mineral reserve and resource estimates and recommended them to the board for approval before publication and release
				● received management reports on internal controls and procedures regarding mineral reserve and resource reporting
				Disclosing mineral reserves and resources
				● monitored industry standards and regulations on estimating and publishing mineral reserve and resource information, and related issues and developments through reports from management
				● received reports from the leading qualified person on the mineral reserve and resource estimates and confirmed that the information has not been restricted or unduly influenced
				● received confirmation from the leading qualified person and COO that the information is reliable and that we will publish mineral reserves and resource estimates according to securities laws and regulations that apply to us
				● received confirmation from the leading qualified person that our disclosure controls for disclosing mineral reserve and resource estimates comply with industry standards
				● reviewed Cigar Lake and JV Inkai life of asset plans
				Risk oversight
				● received management presentations on enterprise risks that the committee oversees
				● received status updates on the mitigation plans pertaining to the risks that the committee oversees (including mineral reserves and resources risks and other material risks within the committee’s mandate)


Safety, health and environment committee

MEETINGS IN 2015: 5 MEMBERS Jim Gowans (chair since May 2015) Daniel Camus Donald Deranger Anne McLellan Neil McMillan (ex-officio) Jim Gowans became the chair and Joe Colvin and Catherine Gignac left the committee in May 2015. Three of the four members are independent The committee reviewed its mandate and is satisfied that it carried out its duties and responsibilities.				KEY RESPONSIBILITIES
				The safety, health and environment committee supports the board in fulfilling its oversight responsibilities regarding safety, health and environmental matters.
				2015 COMMITTEE HIGHLIGHTS
				Overseeing and assessing policies and management systems
				● approved the safety, health, environment and quality (SHEQ) policy
				● reviewed the implementation of the Cameco management system
				● oversaw our compliance with all relevant SHEQ legislation and our SHEQ policy and programs
				● received reports on management’s benchmarking of our policies, systems and monitored processes against industry best practice
				Monitoring and assessing performance
				● reviewed findings of safety, health and environment (SHE) audits, action plans and results of investigations into significant events
				● monitored the US Occupational Safety and Health Administration (OSHA) metrics implemented to drive continued improvements to our safety performance
				● reviewed the annual SHE budget to ensure sufficient funding for compliance
				● determined the SHEQ objectives and results for executive compensation and related impact
				● reviewed our sustainable development update
				● monitored trends and significant events through reports from management
				Risk oversight
				● received management presentations on enterprise risks that the committee oversees
				● received status updates on the mitigation plans pertaining to the risks that the committee oversees (including SHE risks and other material risks within the committee’s mandate)

38 CAMECO CORPORATION

Compensation

We compensate our directors and executives in a way that is fair, competitive and based on performance.

This section of the board’s report is based on the recommendations of the human resources and compensation committee. It gives you insight into our compensation process and the components of our program.

We have provided more information than what is required by regulators to give you a more complete understanding of our decisions.


		Where to find it
		Compensation governance		40
		• Risk management		40
		• Independent advice		41
		Director compensation		43
		• Compensation discussion and analysis		43
		- Approach		43
		- Share ownership		43
		- Fees and retainers		43
		- Assessing the program		44
		• 2015 Details		45
		- Director compensation table		45
		- Incentive plan awards		46
		- Loans to directors		46
		Executive compensation		47
		• Message to shareholders		47
		• Cameco compensation practices		52
		• Executive compensation and strategy		53
		- Compensation timeline		53
		• Share performance and executive compensation		54
		- CEO compensation summary		57
		- CEO’s compensation lookback		58
		• Compensation discussion and analysis		59
		- Approach		59
		- Annual decision-making process		62
		- Measuring performance		63
		- Compensation components		64
		- Program changes for 2016		70
		- 2015 Performance and compensation		71
		- 2016 Compensation decisions		77
		• 2015 Details		78
		- Summary compensation table		78
		- Incentive plan awards		81
		- Equity compensation plan information		83
		- Pension benefits		84
		- Loans to executives		86
		- Termination and change of control benefits		86

2016 MANAGEMENT PROXY CIRCULAR 39

Compensation governance

The board has ultimate responsibility for Cameco’s compensation.

The human resources and compensation committee assists the board in overseeing our human resources policies, executive compensation, succession planning, pension plans and director compensation. The committee is qualified and experienced and 100% independent, and has four members of varying tenure.


YEARS ON COMMITTEE

James Curtiss (chair)		16

Ian Bruce		2

Daniel Camus		5

Anne McLellan		9

Neil McMillan (ex-officio)


NUMBER OF COMMITTEE MEMBERS

Business and industry experience		4 of 4

Executive compensation experience (as a senior executive, managing partner or member of the compensation committee of other public companies)		4 of 4

Governance background		4 of 4

Risk oversight experience		4 of 4

Executive leadership		3 of 4

James Curtiss is a lawyer with a strong background in governance and executive compensation. He has 13 years of experience as committee chair and has been a member of our nominating, corporate governance and risk committee for seven years. Two of the committee members have a strong financial background and both serve as the audit committee chair for other public company boards.

You can read more about the committee members in the director profiles starting on page 11.

Risk management

Compensation risk is addressed by the human resources and compensation committee (see page 32 for details).

Our compensation program:


●		is designed to encourage the right management behaviours
●		uses a broad-based approach to assess performance (balanced scorecard)
●		recognizes appropriate risk taking
●		avoids excessive payouts to executives and employees.

The human resources and compensation committee works with management and the safety, health and environment committee to set corporate objectives for all incentive plans.

The committee stress tests different performance scenarios and back tests previous performance and compensation decisions to make sure decisions and outcomes are appropriate.


						IMPORTANT THINGS TO KNOW
						IMPORTANT THINGS TO KNOW
						We believe in frank and transparent disclosure. The board oversees our compensation policies and practices and can use discretion, subject to limits on adjusting compensation upward. Our culture encourages management to be objective in assessing its own performance and making recommendations to the board to adjust compensation when appropriate. Management developed six compensation principles that were adopted by the board (see page 59). These principles guide all executive compensation decisions at Cameco.

		CLAWBACK POLICY We have a clawback policy that applies to all named executives and compensation received after January 1, 2013. Our previous policy (in effect since 2003) applies to incentive compensation awarded to the CEO and CFO prior to 2013. The policy covers incentive compensation, including any annual bonus, performance share units, restricted share units and stock options granted or received. It allows us to recoup the incentive compensation of the executive at fault if all three of the following events occur:
		●				we make an accounting restatement if there is a material non-compliance with financial reporting requirements under securities laws
		●				an executive engaged in gross negligence, intentional misconduct or fraud which caused or significantly contributed to the restatement
		●				the executive was overcompensated as a result of the restatement.
		If these three events occur, the board and the human resources and compensation committee will decide how the policy will apply. If an executive is at fault, we recoup the amount of the incentive compensation granted during or for the years subject to the restatement that exceeds the compensation that would have been computed based on the restated results. ANTI-HEDGING Our securities trading and reporting policy aligns the interests of our employees and shareholders by prohibiting transactions that could be perceived as speculative or influenced by positive or negative perceptions of Cameco’s prospects, including the use of puts, calls, collars, spread bets and contracts for difference. It also prohibits employees from engaging in hedging activities of any kind respecting Cameco securities or other instruments or agreements, such as LTI awards, where the value or payment obligation is derived from or based on the value of a Cameco security.

40 CAMECO CORPORATION

SHARE OWNERSHIP

Until their target ownership levels are met, our share ownership guidelines require executives to hold their current shares, and to purchase additional shares with their after-tax proceeds from redeeming or exercising equity awards. See page 61 for details.

EQUITY COMPENSATION

LTI awards are allocated 60% to PSUs and 40% to stock options and their value is not guaranteed.

Performance under the PSU plan is based on a combination of absolute and relative measures over a three-year period – relative average realized uranium price, tier-one production and relative TSR. The relative TSR metric has a 40% weighting.

The ultimate value of the stock options is determined by our share price at the time of exercise. All stock options granted since 2008 are currently out-of-the-money.

Independent advice

The board and board committees retain independent consultants as appropriate to assist them in carrying out their duties and responsibilities.

Meridian Compensation Partners (Meridian) serves as the human resources and compensation committee’s independent consultant, and Mercer (Canada) Limited (Mercer) is management’s consultant.

COMPENSATION RISK ASSESSMENT

Meridian reviewed our program changes since 2013 and confirmed that these changes are neutral or reduce compensation-related risk.

Mercer and management conducted a comprehensive review of our compensation program, policies and practices in 2015 as part of our regular practice.

The review included nine key areas:

● compensation principles

● comparator groups

● positioning of target compensation

● pay mix

● incentive plan design

● performance measures

● share ownership

● plan governance and risk mitigation

● supplemental executive pension program.

Meridian reviewed management’s recommendations and provided advice to the human resources and compensation committee. They also reviewed the revised comparator group for benchmarking executive compensation and confirmed that the comparator group is relevant and an appropriate size and that the selection criteria remain valid.

Meridian reviews program changes to confirm that they have a neutral impact or reduce compensation-related risk, and reviewed all changes coming out of the 2015 review.


				ABOUT OUR COMPENSATION FRAMEWORK
				ABOUT OUR COMPENSATION FRAMEWORK
		●		We use a multi-year strategic plan to balance risk and reward.
		●		We embed our corporate objectives into how we assess executive performance.
		●		Compensation is based primarily on performance, not length of service.
		●		We use at-risk compensation to motivate executives because the value depends on performance.
		Balanced decision-making
		●		Corporate performance is based on absolute and relative measures.
		●		We use a balanced score card to provide a more direct line of sight to specific objectives.
		Threshold performance
		●		We must achieve at least a minimum threshold performance to receive incentive award payouts.
		Limits on incentive pay
		●		The STI and PSU plans are designed to pay out at a maximum of 200% of target if performance is exceptional. The human resources and compensation committee and board cannot exceed this cap.
		●		We set achievement thresholds and maximums for each objective under the plans to determine the payout and avoid extremely high payouts from excessive risk-taking.
		●		Potential payouts under the incentive plans are modest as a percentage of revenue and income.
		Clawback policy
		●		We claw back incentive compensation if there was an overpayment because of a restatement of our financial statements due to misconduct.
		No hedging
		●		Our securities trading and reporting policy prohibits directors, executives and other employees from hedging their shares or equity-based compensation.
		CCGG pay-for-performance principles
		●		Our compensation philosophy and practices incorporate the compensation principles that the Canadian Coalition for Good Governance (CCGG) recommends for Canadian companies. These principles reflect pay for performance and integrate risk management functions into the company’s executive compensation philosophy and structure.

2016 MANAGEMENT PROXY CIRCULAR 41

COMMITTEE’S CONSULTANT

The committee considers the independence of advice it receives on compensation matters, and reviews all fees and the terms of consulting services provided by the independent consultant.

The committee considers the recommendations provided by its compensation consultant or management along with other information, and is ultimately responsible for its own decisions.

The committee reviews our director and executive compensation programs regularly as a good practice. A formal review of director compensation was conducted in 2014 and a comprehensive review of executive compensation was conducted in 2015.

The table below shows the fees paid to the independent consultant in 2014 and 2015. Meridian did not provide any services to management in either year.


	2015	2014

Meridian Compensation Partners

Executive compensation-related fees	$110,055	$119,500
All other fees	–	–
Percent of work provided to the committee	100%	100%

Meridian provided a broad range of services in 2015 as part of our comprehensive review of executive compensation:

Executive compensation

●	reviewed the comparator group

●	updated the compensation risk review

●	provided two updates on compensation and governance trends

●	reviewed our 2015 performance against targets

●	reviewed the compensation for the CEO and senior vice-presidents

●	conducted a review of our executive compensation program, performance measures, and STI and PSU plan objectives

●	completed a pay for performance assessment

●	reviewed our share ownership and hold requirements

●	conducted an in-depth review of the compensation discussion and analysis (CD&A)

●	consulted on numerous compensation governance matters, including clawbacks, proxy advisor positions, realized and realizable pay disclosure and ISS pay-for-performance modeling.

The committee reviewed Meridian’s report on independence as contemplated by the NYSE rules, is satisfied with the report and also determined that Meridian is independent.

42 CAMECO CORPORATION

Director compensation

Compensation discussion and analysis

1. Approach

We have three goals:


●		Recruit and retain qualified individuals to serve as members of our board and contribute to our overall success.
●		Align the interests of our board and shareholders by requiring directors to own shares or share equivalents, and receive at least 60% of their annual retainer in deferred share units until they meet our share ownership guidelines.
●		Pay competitively by positioning compensation at the median of director compensation paid by companies that are similar in nature and scope of operations and comparable in size.

2. Share ownership

We introduced share ownership guidelines for non-executive directors in 2003 to more closely align their interests with those of our shareholders.

The human resources and compensation committee regularly reviews the share ownership guidelines and compares our director share ownership levels to our comparator group of companies. At the time of the director compensation review in 2014, we increased the guidelines from three times to four times the annual retainer to align more closely with market practices and strengthen the alignment of their interests with those of our shareholders.

Directors must build their ownership of Cameco shares or DSUs and ultimately hold at least four times their annual retainer. A director who:


●		joined the board before July 1, 2014 has the initial five-year period to meet the previous target (three times the annual retainer) and an additional two years to meet the new target (four times the annual retainer)
●		joins after July 1, 2014 has five years to meet the new target
●		becomes the board chair has an additional three years to meet the target (due to the higher retainer as board chair).

We assess compliance annually, and value shares and DSUs at the price they were acquired or the year-end closing price of Cameco’s shares on the TSX, whichever is higher.


						ABOUT DSUs
						ABOUT DSUs
						A deferred share unit (DSU) is a notional share that has the same value as one Cameco common share. DSUs earn additional units as dividend equivalents, at the same rate as dividends paid on our common shares. DSUs are paid out to directors in cash following their retirement from the board.

As of December 31, 2015, all of the nominated directors are in compliance with the guidelines. They either hold the minimum, or have time remaining to acquire the necessary holdings. See the director profiles beginning on page 11 for details about each director’s share ownership.

The human resources and compensation committee reviews any situation where a director does not meet the requirement by the required date or maintain the minimum ownership level, and recommends a course of action to the board. The board has the discretion to decide what action, if any, should be taken.

As of December 31, 2015, directors held $10,626,996 worth of DSUs based on $17.07, the year-end closing price of Cameco shares on the TSX.


						SHARE OWNERSHIP REQUIREMENTS
						SHARE OWNERSHIP REQUIREMENTS
						In 2014, we increased our director share ownership guidelines from three times to four times their annual retainer.

3. Fees and retainers

Director compensation includes:

●	an annual retainer (higher retainer for the non-executive chair of the board)

●	an annual fee as committee chair or committee member (higher fee for the human resources and compensation and audit and finance committee chairs)

●	an attendance fee for each board and committee meeting they attend (higher fee for the human resources and compensation and audit and finance committee members)

●	a travel fee to cover the necessary travel time to attend board and committee meetings.

The non-executive chair receives a flat fee retainer, so Neil McMillan did not receive any committee retainers or board or committee attendance fees in 2015. We pay for reasonable travel and out-of-pocket expenses relating to directors’ duties.

2016 MANAGEMENT PROXY CIRCULAR 43

The table below shows our current non-executive director fee schedule, which was revised on July 1, 2014. Directors who live outside of Canada receive their compensation in US dollars. Directors who are employees of Cameco, such as Tim Gitzel, do not receive director compensation.

Total compensation for each director in 2015 was at the 52^nd percentile of the S&P/TSX 60.

ANNUAL RETAINER

($)

Non-executive chair of the board

375,000

Other non-executive directors

160,000

Committee members (per committee)

5,000

Committee chairs

Audit and finance committee and Human resources and compensation committee

Other committees

20,000

11,000

ATTENDANCE FEES (PER MEETING)

Board meetings

1,500

Audit and finance committee meetings and Human resources and compensation committee meetings

2,000

Other committee meetings

1,500

TRAVEL FEES (PER TRIP)

Greater than 1,000 km within Canada

1,700

From the US

1,700 (US)

From outside North America

2,700 (US)

A director who has not met the share ownership guidelines must receive at least 60% of their annual retainer in DSUs.

A director who has met the guidelines can receive all of the retainer and fees in cash, or a portion in cash and the balance in DSUs in increments of 25%, which they decide before the beginning of the fiscal year. See the director compensation table on the next page for details.

Directors who elect to receive all of their compensation in cash continue to increase their share ownership through dividend equivalents paid in DSUs.

Directors must maintain their share ownership once they meet the guidelines, however we value the shares and DSUs on an ongoing basis using the closing price of our shares on the TSX or the acquisition value, whichever is higher.

4. Assessing the program

The human resources and compensation committee periodically reviews director compensation and makes recommendations to the board as appropriate.

The committee conducted a formal review of director compensation in 2014. The board approved changes, which went into effect on July 1, 2014 and were reported in our 2015 circular. The next formal review will be conducted in 2016.

44 CAMECO CORPORATION

2015 Details

Daniel Camus, Joe Colvin and James Curtiss received their compensation in US dollars because they live outside of Canada. The amounts relating to their compensation were converted to Canadian dollars at the following exchange rates:

MARCH 24, 2015

JUNE 16, 2015

SEPTEMBER 22, 2015

DECEMBER 22, 2015

$1 (US)

$1.2501 (Cdn)

$1.2312 (Cdn)

$1.3258 (Cdn)

$1.3937 (Cdn)

Director compensation table

The table below shows fees earned by each non-executive director in 2015, based on the fee schedule, their committee memberships and the number of meetings attended.

Tim Gitzel does not receive any compensation as a director because he is compensated in his role as president and CEO (see the summary compensation table on page 78). Neil McMillan is our non-executive chair of the board and his board retainer reflects the fees paid to him in this capacity.


			RETAINER				ATTENDANCE FEES

NAME	BOARD ($)		COMMITTEE MEMBER ($)		COMMITTEE CHAIR ($)		BOARD ($)		COMMITTEE MEETINGS ($)		TRAVEL FEE ($)		TOTAL PAID ($)		% OF TOTAL RETAINER PAID IN DSUs (%)
Ian Bruce		160,000		15,000		–		15,000		26,500		–		216,500		50
Daniel Camus		208,032		19,503		–		19,426		38,732		17,805		303,499		50

John Clappison		160,000		5,000		20,000		15,000		21,000		10,200		231,200		60

James Curtiss		208,032		6,501		26,004		19,426		25,069		11,211		296,243		0

Donald Deranger		160,000		10,000		–		15,000		12,000		–		197,000		60

Catherine Gignac		160,000		8,901		6,709		15,000		19,500		10,200		220,310		60

Jim Gowans		160,000		5,000		11,000		13,500		12,000		8,500		210,000		100

Nancy Hopkins		160,000		5,000		11,000		15,000		21,000		–		212,000		25

Don Kayne (joined the board on January 1, 2016)		–		–		–		–		–		–		–		–

Anne McLellan		160,000		15,000		–		15,000		26,500		–		216,500		60

Neil McMillan		375,000		–		–		–		–		–		375,000		60

Joe Colvin		78,146		2,442		5,373		11,166		8,685		4,218		110,029		0

Victor Zaleschuk		62,857		5,893		–		7,500		8,500		3,400		88,150		25

Total		2,052,067		98,240		80,086		161,018		219,486		65,534		2,676,431		–

Joe Colvin and Victor Zaleschuk retired from the board on May 22, 2015.

2016 MANAGEMENT PROXY CIRCULAR 45

Incentive plan awards – DSUs

The next table shows what each non-executive director earned in DSUs in 2015. We have combined information from two mandatory tables: Incentive plan awards – Value vested or earned during the year and Outstanding share-based and option-based awards, into the table below.

Directors received their retainer and fees in cash and DSUs:

●

Share-based awards – Value vested during the year is the amount of DSUs that the directors received in 2015, valued as of the grant dates. It includes all of the DSUs that vested as of the grant date and DSUs granted as dividend equivalents in 2015.

●

Share-based awards – Market or payout value of vested share-based awards not paid out or distributed are all of the directors’ DSUs that have vested. DSUs are not paid out until the director resigns or retires from the board. The DSUs were valued at $17.07, the closing price of Cameco shares on the TSX on December 31, 2015.

NAME

SHARE-BASED AWARDS

VALUE VESTED DURING THE YEAR

($)

MARKET OR PAYOUT VALUE OF VESTED SHARE-BASED

AWARDS NOT PAID OUT OR DISTRIBUTED ($)

Ian Bruce

114,076

336,280

Daniel Camus

167,696

831,462

John Clappison

110,322

718,256

James Curtiss

41,803

1,920,508

Donald Deranger

157,040

576,563

Catherine Gignac

98,402

170,659

Jim Gowans

228,045

962,432

Nancy Hopkins

63,232

503,545

Don Kayne

(joined the board on January 1, 2016)

Anne McLellan

107,103

570,359

Neil McMillan

245,762

1,095,164

Joe Colvin

16,566

1,526,437

Victor Zaleschuk

37,234

1,415,331

Total

1,387,281

10,626,996

See the director profiles starting on page 11 for the number of Cameco shares and DSUs held by each director.

Incentive plan awards – options

We stopped granting options to directors in 2003. None of the directors have any outstanding options.

Loans to directors

As of March 8, 2016, we and our subsidiaries had no loans outstanding to any current or former directors, except routine indebtedness as defined under Canadian securities laws.

46 CAMECO CORPORATION

Executive compensation

Cameco is committed to maintaining the transparency of our executive compensation program.

The following message by the chair of the human resources and compensation committee highlights key aspects of our executive compensation program. A more detailed discussion follows in the compensation discussion and analysis (CD&A) beginning on page 59.

Message to shareholders

Dear Shareholder,

On behalf of the human resources and compensation committee, I am pleased to share with you our approach to executive compensation for 2015 and provide additional insight into how Cameco’s executives are paid and the reasons why.

COMMITMENT TO PAY FOR PERFORMANCE

Your board is committed to pay for performance. Executive pay at Cameco is linked to both the execution of the business plan and our commitment to deliver strong returns to shareholders. Our guiding principle of executive compensation is that an appropriate mix of fixed and variable compensation, short- and long-term incentives, and risk and reward will motivate executives to increase long-term shareholder value.

The committee considers many factors in setting total compensation, including competitive market conditions, internal equity, scope of the role, risk-taking, current business challenges, longer-term performance and strategic objectives.

Most of management’s compensation is incentive-based and dependent on short- and long-term performance. We mitigate risk through a carefully designed compensation program, risk policies and a comprehensive decision-making process. Deferred vesting of equity-based compensation, share ownership requirements, strict rules prohibiting hedging, clawback provisions, caps on incentive payouts and a balanced scorecard to measure and assess performance all discourage excessive risk-taking (see the Compensation discussion and analysis beginning on page 59 for more detail).

COMPREHENSIVE COMPENSATION REVIEW

In 2015, the committee led its triennial comprehensive review of the executive compensation program which included expert advice from the committee’s independent consultant (Meridian) and management’s consultant (Mercer). Overall, the review found that the compensation program is fundamentally sound and only minor adjustments were required to reinforce the link between pay and performance, align more closely with the median of the market, mitigate risk and support good governance generally. The changes are relatively minor because the committee completes an annual market check of the major

components of the executive compensation program and corrects any major discrepancies. Any changes are reported to Cameco’s shareholders in the CD&A.

The committee implemented the following changes for 2016:

● adjusted the compensation comparator group to reflect Cameco’s sale of its interest in Bruce Power and the resulting increased focus on mining

● changed the relative performance benchmark for the performance share unit plan to the TSX 60 because Cameco’s share price tracks more closely with this index and it is a relevant group of companies that reflects Cameco’s competitors for shareholder investment

● increased the short-term and long-term incentive targets for each named executive to increase pay for performance and better align with the comparator group.

COMPENSATION AND PERFORMANCE PEERS

The committee assesses executive compensation levels using a group of comparator companies. These companies are in similar capital intensive, complex and highly-regulated businesses with head offices in Canada. These are also the companies that Cameco competes with for executive talent.

While these companies are suitable for comparing compensation, historically there has been some challenge to using them for comparing total shareholder return (TSR) – a key measure for assessing relative company performance for the performance share unit plan. Our analysis shows that Cameco’s share price movement is not correlated with the current comparator group. In fact, Cameco is one of the least risky stocks in the comparator group and within the uranium industry group itself.

The committee also evaluated how Cameco’s TSR correlates with the broader market (TSX Composite, TSX 60 and TSX Global Mining indices) and a handful of uranium companies. The committee determined that the TSX 60 would be a more effective benchmark for measuring Cameco’s relative TSR for two reasons:

● the TSX 60 is an index of leading companies and the average of the index falls within Cameco’s parameters of one-third to three times its size

● it measures how Cameco performs against its competitors for shareholder capital, better aligning with shareholders’ interests.

2016 MANAGEMENT PROXY CIRCULAR 47

2015 COMPANY PERFORMANCE

The committee measures Cameco’s performance in absolute and relative (compared to other companies and benchmarks) terms as well as in short-term (annual) and long-term accomplishments. Short-term incentive awards are tied to the achievement of annual targets in the balanced scorecard (financial, operational, safety, environment and community support) that contribute to long-term sustainable shareholder value (see page 71).

Long-term incentive awards are tied to absolute and relative measures, including relative share performance, the uranium price achieved relative to prices realized by competitors, and the growth in Cameco’s tier-one uranium production over a three-year period.

Although there were some positive developments in 2015, there were no fundamental changes to the uranium market. Supply continued to be readily available in the near term, and the spot price remained depressed, although relatively stable, ending the year at $34.23 compared to $35.50 at the end of 2014. The long-term uranium price declined by 11% and averaged about $46 (US) per pound for 2015.

Despite this difficult market environment, Cameco achieved adjusted net earnings¹ of $344 million in 2015 compared to $412 million in 2014, demonstrating the strength of Cameco’s marketing strategy in providing protection in a declining market.

Other accomplishments in 2015:

●	annual gross profit of $697 million, up 9% from 2014

●	record annual uranium revenue of $1,866 million, up 5% from 2014

●	accelerated ramp-up of Cigar Lake mine and achieved 11.3 million pounds (100% basis) of packaged production

●	secured regulatory approvals to increase production at McArthur River.

Cameco is committed to living a strong safety culture, while always looking to continually improve. Injury rates trended downward across the company. It did not meet its targets for the year, however average radiation doses remained low and stable.

Cameco is also committed to being a leading environmental performer and had no significant environmental incidents in 2015, the eighth year in a row (see page 73).

Gaining the trust and support of communities, indigenous people, governments and regulators is necessary to sustain its business. Cameco earns support and trust through excellent safety and environmental performance, by proactively engaging stakeholders in an open and

1	Adjusted net earnings is a non-IFRS measure as described in our 2015 annual MD&A and excludes the impact of various items as detailed in note 1 on page 73.

transparent way, and by making a difference in the communities where it operates.

Additional highlights:

● over $299 million in procurement from locally-owned northern Saskatchewan companies

● 1,369 local personnel from northern Saskatchewan (811 Cameco employees, or 49.8% of the employee workforce; and 558 contractors, or 60.3% of the contractor workforce)

● community engagement activities at all of Cameco’s operations

● established relationships with five universities along with Los Alamos National Laboratory, and the United States Geological Survey in conducting groundwater restoration.

Cameco also continues to build an engaged, qualified and diverse organization capable of implementing its strategic plan in a challenging market. It earned four awards in 2015 that recognize its strengths as an employer.

Despite continued market pressures, Cameco achieved or exceeded most of its targets for the short-term incentive plan (see page 71), resulting in an overall performance rating of 98%.

Although Cameco’s share price declined by about 10% in 2015, one-year relative TSR was at the 75^th percentile of the comparator group, reflecting strong performance and the ability to protect earnings in a declining market.

Compensation decisions were also impacted by the departure of one executive during the year. The decision not to fill the vacancy in light of the uncertain market conditions resulted in increased responsibilities for the CEO and other four named executives.

2015 CEO COMPENSATION

Corporate performance remains the single biggest factor affecting the board’s decisions on pay for Cameco’s CEO and other senior officers. The CEO’s target compensation mix is 19% base salary and 81% at-risk compensation (19% short-term incentive (STI) and 62% long-term incentives (LTI)).

The LTI is awarded 60% as performance share units (PSUs) and 40% as stock options. The heavier weighting on PSUs increases the emphasis on performance-based vesting, reduces shareholder dilution and provides strong alignment with shareholder interests. Relative TSR is weighted 40% in the PSU plan because of its importance to shareholders.

The CEO’s base salary was increased by 6.8% for 2015, reflecting Cameco’s strong operating performance in a challenging nuclear/uranium market environment and to bring his salary closer to the market median.

His annual bonus was $1,084,000, reflecting the company’s solid performance (98%) on the STI targets and his individual performance.

The 2013 PSUs vested on December 31, 2015 and, based on corporate performance and share price, paid out on March 1, 2016 at 92.5% of their original grant value disclosed in our 2012 circular.

48 CAMECO CORPORATION

The CEO’s total direct compensation in 2015 was $5.9 million, up from 2014. This reflects solid corporate performance as assessed by the committee and his increased responsibilities due to the decision not to fill the vacated executive role. The CEO’s three-year average realized and realizable pay at the end of 2015 was $3.1 million, which is $2.8 million less than his reported compensation (you can read more about the CEO’s compensation beginning on page 57).

THREE-YEAR PERFORMANCE

Over the past three years, the uranium industry continued to be negatively affected by events in Japan, which resulted in the entire Japanese reactor fleet being shut down in 2011. While there have been restarts, the Japanese reactor fleet continues to face challenges. The average uranium spot price fell by about 21% from 2012 to 2013, 13% from 2013 to 2014, and 4% from 2014 to 2015 for a total drop of about 34% for the three-year period.

While Cameco’s share price is usually highly correlated to the uranium price, absolute TSR increased by 14.7% from 2012 to 2013, decreased by 11.9% from 2013 to 2014 and also decreased by 8.4% from 2014 to 2015.

Despite the 34% decline in the uranium spot price, Cameco’s adjusted net earnings² in 2015 decreased by less (22%) from 2013. This level of earnings over a very challenging three-year period demonstrates the strength of management’s marketing strategy and focus on cost reduction.

CEO COMPENSATION 2013 TO 2015

Tim Gitzel became Cameco’s president and CEO shortly after the events at Fukushima in 2011, which affected Cameco directly as one of the largest suppliers of uranium to nuclear power plants. Several countries announced phase-outs of nuclear reactors, halted growth of their nuclear programs, and took a pause to examine the safety of existing reactors to determine what improvements may be needed. The CEO has led the company through a market coming to grips with the implications of the Japanese situation for the global nuclear industry.

During the past three years, the CEO revised Cameco’s strategy to focus on tier-one assets and manage the supply according to market conditions in order to return the best value possible, while continuing to streamline costs, increase efficiency and enhance capital allocation. At the same time he has maintained a strong focus on operating safely, protecting the environment, attracting/retaining skilled employees and securing community support.

2	Non-IFRS measure as described in our 2015 annual MD&A.

See note 1 on page 73 for more information.

While Cameco’s share price remained under pressure during this period as uranium prices continued to decline, three-year relative TSR was at the 67^th percentile, outperforming the comparator group.

2015 COMPENSATION REVIEW

In 2015, the committee led a comprehensive review of our executive compensation program, policies and practices, consistent with our policy of reviewing executive compensation every three years.

Working with its independent consultant (Meridian) and management’s consultant (Mercer), the committee concluded that Cameco’s executive compensation is sound but recommended some changes to reinforce the link between pay and performance, align more closely with the median of the market, mitigate risk and support good governance generally.

These recommendations followed extensive discussions between Mercer, Meridian and management, and were approved by the board in October 2015.

2016 program changes

Compensation principles (see page 59)

Refined the language as appropriate to strengthen the pay for performance focus

Compensation comparator group (see page 60)

Replaced four companies in light of changes in the industry and the sale of our interest in Bruce Power L.P., following a multi-step evaluation process based on existing criteria and a focus on the resource sector, mining in particular

Target compensation (see page 59)

Continue to target the median of the market but add the flexibility to position pay within a competitive range of the median for target performance (change also applies to base salaries)

STI plan

Cap each corporate performance measure at 150% and the overall maximum plan payout at 200%

PSU plan (see page 69)

Assess our TSR relative to the TSX 60 instead of a performance comparator group because the index includes leading companies, the average falls within our size parameters and it better aligns with shareholder interests.

All changes went into effect on January 1, 2016.

The committee also reviewed the performance measures and other features of our incentive plans, the supplemental pension plan and executive share ownership guidelines, but did not recommend any changes in these areas.

2016 MANAGEMENT PROXY CIRCULAR 49

The committee compared TSR performance with the CEO’s three-year average reported compensation (which includes the value of the equity-based compensation at the time of grant), and three-year average realized and realizable compensation (which includes the estimated value of the equity-based compensation based on actual performance and share price).

LOGO

The CEO’s realized and realizable pay in each year is lower than the grant date value disclosed in the summary compensation table, demonstrating the alignment between Cameco’s compensation program and performance. Cameco has had strong financial, production and safety results in this three-year period, however, TSR was below target one of the three years. Realized and realizable compensation is lower when all performance measures do not show positive results.

LOOKING AHEAD TO 2016

The market today remains in a state of oversupply and market activity is much lighter than in the past. Utilities are well covered in their fuel requirements and are not under pressure to contract for more.

Cameco’s strategy remains centered on taking advantage of the long-term growth it sees coming, while maintaining the ability to respond to market conditions as they evolve. Cameco carries out all of its business with a focus on safety, people and the environment. The core business is uranium production, the largest value driver of the nuclear fuel cycle. Cameco’s uranium strategy is to focus on tier-one assets and profitably produce at a pace aligned with market signals to increase long-term shareholder value.

The targets for the STI and LTI awards are aligned with the strategy as they focus on:

●

achieving shareholder returns better than the TSX 60

●

delivering net earnings and cash flow in a tough market environment

●

achieving profitable uranium production

●

effectively managing capital projects

●

achieving uranium sales prices higher than our competitors

●

maintaining production flexibility

● attracting and retaining a skilled workforce

● keeping people safe

● protecting the environment

● securing support from our communities.

This strategy provides Cameco with increased flexibility to deliver the best value through this period of uncertainty, while positioning the company to benefit when more certainty returns to the market.

For 2016, the committee, on the advice of its independent consultant, adjusted the CEO’s salary by 2.5% to $1,025,000. His target STI and LTI were increased to 120% and 355% of salary, respectively, to move closer to the median of the market. The CEO was granted $1,455,500 options and $2,183,250 PSUs in 2016.

The CFO’s role expanded in August 2015 to include the marketing and trading functions. As a result, he received a 13% increase in salary, STI target of 75% (up from 60%) and LTI target of 250% (up from 200%) effective August 1, 2015. There were no further changes for 2016.

Effective January 1, 2016, the chief operating officer received a 2.75% increase in salary, STI target of 75% (up from 70%) and LTI target of 250% (unchanged from 2015).

The chief corporate officer’s role expanded to include the supply chain management function effective December 1, 2015. Effective January 1, 2016, she received a 2.75% increase in salary, STI target of 60% (up from 50%) and LTI target of 200% (up from 150%).

The portfolio of the chief legal officer and corporate secretary was expanded to include the exploration and corporate development functions as of December 1, 2015. Effective January 1, 2016 he received a 3.38% increase in salary, STI target of 60% (up from 50%) and LTI target of 200% (up from 150%).

These changes in executive base salaries follow a 4% increase in 2015 generally, 2% increase in 2014 and 0% increase in 2013.

The compensation review indicated that STI and LTI targets were below median for the named executives which prompted the changes in targets noted above. The changes to total compensation now position the executives within the competitive range of the market median.

The compensation timeline on page 53 gives more context to the compensation decisions described above. See page 54 for a discussion of the trend in share performance and total compensation awarded to the named executives over the past five years.

The committee is committed to working hard on behalf of the board and overseeing all compensation matters in the best interests of Cameco and its shareholders. We introduced ‘say on pay’ in 2010 and have held an advisory vote every year since. Last year we received over 88% approval for our approach to executive compensation. While this feedback is very positive, we continue to monitor developments in executive compensation and evolving best practices to make sure our programs and decisions are appropriate.

50 CAMECO CORPORATION

I hope this overview has given you more insight into our approach to executive compensation and the strong link to performance and the long-term interests of Cameco and its shareholders. It has been my pleasure to serve Cameco as a director and the chair of the compensation committee for many years. This is my last year as a member of the board – I have been a shareholder for many years and am confident of Cameco’s prospects for continued growth.

Sincerely,

LOGO

James Curtiss

Chair

Human resources and compensation committee

2016 MANAGEMENT PROXY CIRCULAR 51


Cameco compensation practices The human resources and compensation committee ensures our executive compensation program is based on sound decision-making processes and is competitive, pays for performance, motivates and attracts talent, and focuses on creating shareholder value. WHAT WE DO

		Page

Ö	Pay for performance – 81% of the compensation for the CEO is at-risk pay – variable, contingent on performance and not guaranteed	59

Ö	Share ownership – we require our executives to own Cameco shares and to obtain additional shares using the proceeds from redeeming or exercising vested equity awards until they have met their target ownership	61

Ö	Performance based vesting – 60% of the long-term incentive vests at the end of three years based on our absolute performance, relative TSR and relative average realized uranium price	67

Ö	Benchmarking – we benchmark executive compensation against a size and industry appropriate comparator group and target compensation to the median of the group	60

Ö	Caps on incentive payouts – our STI and PSU plans cap payouts at a maximum of 200% of target for exceptional performance. The human resources and compensation committee and the board cannot exceed this cap	41, 64

Ö	Stress testing and back testing – we stress test different scenarios to assess appropriateness of pay and avoid excess risk-taking, and the committee looks back at long-term incentive awards previously granted when granting new awards	40

Ö	Clawbacks – our clawback policy applies to all executives and all incentive compensation awarded	40

Ö	Anti-hedging – directors, executives and other employees are prohibited from hedging their shares or equity-based compensation	40

Ö	Independent advice – the committee receives compensation advice from an independent advisor	41

Ö	Realized and realizable pay – the value ultimately realized from a long-term incentive award can be significantly different from the grant value. Share price is only one factor that affects the payout value	54, 64

Ö	Modest benefits and perquisites – these are market competitive and represent a small part of total compensation	70

Ö	Employment agreements – employment agreements with the named executives protect specialized knowledge, contacts and connections obtained while at Cameco	86

Ö	Double trigger – the severance provisions in our executive employment agreements and our LTI plans have double triggers in the event of a change of control	87)

WHAT WE DON’T DO
X	No repricing of stock options

X	No compensation for dividends on PSUs until they vest

X	No tax gross-ups

X	No excessive severance obligations

X	No bonus amounts or value of equity awards included in pension calculations (see page 84)

See Compensation governance on page 40 and the CD&A beginning on page 59 for more information.

52 CAMECO CORPORATION

Executive compensation and strategy

Cameco’s strategy is to focus on our tier-one assets and to profitably produce uranium products at a pace aligned with market signals to increase long-term shareholder value. The board has a key role to play in strategy, and works directly with management in developing the strategic plan. Management’s primary focus is on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. The board plays a key role in overseeing risk and execution of the corporate strategy, and challenging management on their progress.

We establish corporate objectives to achieve our strategic plan and our executive compensation program is directly aligned with the strategic plan:

●	measures within these objectives form the basis of the compensable targets under the short-term incentive plan

●	performance share units (PSUs) measure absolute and relative performance over a three-year period. The value realized is based on share performance and outcomes against targets based on our long-term strategic goals: relative TSR, relative uranium price and absolute production.

Compensation timeline

The chart below shows the different components that make up total direct compensation for our executives. Our short-term incentive plan offers the potential for executives to earn a cash bonus based on their success in achieving pre-established corporate and individual performance targets for the year.

Long-term incentives include a PSU plan and stock option plan, which have different terms for vesting and payouts. These incentive plans focus management on the importance of future value and drive corporate performance over the longer term.

Performance-based vesting and share price fluctuation can have a dramatic impact on the realized and realizable value of equity-based compensation. The named executives realized 92.5% of the grant value of the 2013 PSU awards that vested at the end of 2015 (see pages 74 through 76). Option awards granted to the named executives over the past eight years are out-of-the-money (exercise price is greater than the share price as of December 31, 2015).

LOGO

2016 MANAGEMENT PROXY CIRCULAR 53

Share performance and executive compensation

The graph below compares our TSR to the S&P/TSX Composite Total Return Index, S&P/TSX 60 Total Return Index and S&P/TSX Global Mining Index for the past five years, assuming an initial $100 investment at the end of 2010 and reinvestment of dividends over the period.

It also compares our TSR to the named executives’ compensation and shows a strong correlation between our share performance and realized and realizable compensation.

LOGO

●

The three-year average reported compensation is for the named executives during the three-year period ending in the designated year. It reflects the sum of total compensation over the three years from the summary compensation table in our previous management proxy circulars, divided by three. Where there were changes in named executives, we used the incumbents in place at the end of the year.

●

The three-year average estimated realized and realizable compensation is for the named executives during the three-year period ending in the designated year. It reflects the sum of estimated realized and realizable compensation over the three years, including base salary, short-term incentive bonus, realized or realizable amounts for LTI (PSUs, options and RSUs) and pension value, divided by three. These amounts have been determined in the same manner as the total realized and realizable compensation in the CEO’s compensation lookback table on page 58.

●	We believe the method of three-year averages provides a reasonable reflection of long-term compensation because PSUs and RSUs pay out after three years and options vest over three years.

MARKET CONTEXT

Leading up to 2010, the uranium market experienced periods of growth and relative stability. From 2005 to 2007, heavy contracting occurred in the context of a rising market, followed by a natural progression to a more stable market and discretionary purchasing on the part of utilities.

In 2010, market sentiment began to shift towards growth again as Chinese utilities entered the market in a sizeable way, signing long-term uranium contracts with multiple suppliers to fuel their growing nuclear fleet. This became a catalyst for the market as the uranium spot price rose from around $40/lb (US) to over $70/lb (US) by the end of the year.

In March 2011, however, the events at the Fukushima nuclear power plants in Japan halted and reversed this trend. Uranium prices fell, as did the share prices of companies involved in uranium exploration, development and production.

54 CAMECO CORPORATION

As Japan idled its reactor fleet and some countries pursued phase-out of or a decrease in their nuclear generation, the uranium market entered a period of fundamental over-supply.

Market recovery has taken longer than originally anticipated as a result of a slower than expected pace of reactor restarts in Japan, unexpected reactor shutdowns in other regions, and delays in reactor construction programs. At the same time, supply has continued to perform well, adding to the delay in market improvement. There has been some supply curtailment but, for the most part, primary supply has remained fairly stable, while other sources of supply have increased. For example, enrichers, also feeling the negative impacts of Fukushima, have increased underfeeding at their plants, adding additional volumes to an already oversupplied uranium market.

Since 2012, our share price has diverged from movements in the uranium spot price and has generally moved in patterns similar to mining and energy stocks. In 2015, global economic uncertainty, weak commodity markets and the continued decline of oil prices caused equity markets to be very unsettled. Investors moved in and out of commodity and energy stocks depending on their appetite for risk, causing significant share price volatility for companies in these sectors, including our own.

LOGO

2016 MANAGEMENT PROXY CIRCULAR 55

ABOUT EXECUTIVE COMPENSATION

The graph below shows the trend in total compensation awarded to our named executives from 2011 to 2015. For previous years, the grant date value of total compensation for the named executives is the total annual compensation for the named executives disclosed in the summary compensation table in our previous management proxy circulars. The grant date value of total compensation for the named executives for the current year are those incumbents in place at the end of the year as disclosed in this proxy circular.

LOGO

●

2011 – base salaries and incentive awards for the five equivalent executive positions were lower than 2010 because of changes in the five positions that were partly offset by a retention incentive granted to Tim Gitzel when he was appointed president and CEO. Total compensation declined in 2011, but was proportionately less than our share performance because we delivered excellent financial and operating results.

●

2012 – the executive team received modest increases in base salary. Although corporate performance was strong, the short-term incentive bonus was significantly reduced from 2011 because we did not fully meet some of our compensable targets. The bonuses for the CEO and CFO were slightly higher in 2012 compared to 2011 because they were based on a full year in their new roles, versus only a half year in 2011.

●

2013 – the executive team received no increases in base salary. Although our corporate performance was solid, we did not fully meet some of our compensable targets and continued to be affected by industry conditions. The short-term incentive bonuses awarded to our named executives were less than in 2012.

●	2014 – the executive team received modest increases in base salary in 2014. Total compensation increased as a result of special RSU retention awards made to three named executives in 2014. Bonuses for 2014 were higher because of our strong corporate performance in 2014.

●

2015 – the executive team received base salary increases consistent with their market position in 2015. One member of the executive team resigned in 2015 and his responsibilities were subsequently re-allocated to the remaining members of the executive team. The CFO’s role was expanded to include the marketing portfolio and he received a 13% increase in base salary in August in recognition of the new role. Bonuses for 2015 were based on a year of solid performance (see pages 71 through 73).


	THIS YEAR’S NAMED EXECUTIVES
	THIS YEAR’S NAMED EXECUTIVES
We have six named executive officers (named executives) in 2015, including the chief executive officer, chief financial officer, the next three most highly compensated officers at December 31, 2015, and one former officer who would have otherwise qualified as one of the three most highly compensated officers were he actively employed at December 31, 2015.
	● Tim Gitzel	President and Chief Executive Officer (CEO)
	● Grant Isaac	Senior Vice-President and Chief Financial Officer (CFO)
	● Robert Steane	Senior Vice-President and Chief Operating Officer (COO)
	● Alice Wong	Senior Vice-President and Chief Corporate Officer
	● Sean Quinn	Senior Vice-President, Chief Legal Officer and Corporate Secretary
	● Ken Seitz	former Senior Vice-President and Chief Commercial Officer

56 CAMECO CORPORATION


CEO compensation summary

Tim Gitzel President and CEO	Tim Gitzel became president and CEO of Cameco Corporation on July 1, 2011. Tim joined Cameco in January 2007 as senior vice-president and chief operating officer and was appointed president in May 2010. He has more than 20 years of senior management experience with Canadian and international uranium mining companies.

	2015 pay mix (actual compensation)

	2015 base salary and short-term incentive Tim’s total cash compensation in 2015 was $2,084,000, including: ● base salary of $1,000,000 ● an annual cash bonus of $1,084,000, which was 108% of his target award. Our STI plan for 2015 (based on 12 objectives) scored 98% of target.

	Long-term (equity-based) incentives As president and CEO, Tim receives approximately 60% of his compensation on a deferred basis as long-term incentives. This is at-risk, equity-based compensation – if our share price increases, so will the value Tim receives when the long-term incentives vest in several years. The table below shows the grant and current realized and realizable value of long-term incentives awarded to Tim from 2013 to 2015. 2013 PSUs vested on December 31, 2015 with a realized value of $1,527,893. His options have a current value of zero because the exercise prices of all awards granted between 2013 and 2015 are more than our share price on December 31, 2015. The total realized and realizable value of Tim’s long-term incentive compensation is 49% of the total grant value, highlighting the link to pay for performance. To quantify the long-term incentives, we are reporting over a three-year period to provide a reasonable reflection of long-term compensation because PSUs pay out after three years and options vest over three years.

	•	PSUs and options (grant value) – amounts represent the total of the 2013 to 2015 PSUs grant values and the 2013 to 2015 options grant values in the summary compensation table on page 78.
	•	PSUs (realized and realizable value) – amount Tim received on PSUs granted to him in 2013 and paid in early 2016 plus estimated amounts for PSUs granted to him in 2014 and 2015. The realizable value of PSUs granted in 2014 and 2015 have been estimated based on target vesting (100%) and the closing price of Cameco shares on December 31, 2015 of $17.07.
	•	Options (current value) – includes the value of in-the-money options granted in 2013, 2014 and 2015. The value of the options granted to Tim in this period are based on the closing price of Cameco shares on the TSX on December 31, 2015. The realized and realizable value is zero because none of the options are in-the-money.

2016 MANAGEMENT PROXY CIRCULAR 57

CEO compensation lookback

The following table takes a closer look at Tim’s compensation over the past three years. It shows the value of his three-year average compensation and his compensation disclosed in the summary compensation table in each of the past three years compared to their realized and realizable value.

His realized and realizable pay amounts are lower than the grant value disclosed in the summary compensation table, demonstrating the alignment between our compensation program and performance. Cameco has had strong financial, production and safety results in this three-year period, however, TSR was below target one of the three years. Realized and realizable compensation is lower when all performance measures do not show positive results.

TIM GITZEL’S COMPENSATION (2013 TO 2015 AND THREE-YEAR AVERAGE)

Three-year average

2015

2014

2013

CEO three-year average compensation

The charts below show the impact of at-risk pay and the effect that performance and share price have on realized and realizable pay. There is a difference of -27% between the average grant value and the average year-end value.

LOGO

Base salary

$951,467

$1,000,000

$936,400

$918,000

Annual incentive pay

976,333

1,084,000

1,060,000

785,000

RSUs paid out

493,157

–

1,479,471

–

PSUs awarded and paid out

1,054,891

1,527,893

1,168,065

468,716

Options exercised

–

Realized compensation subtotal

3,475,848

3,611,893

4,643,936

2,171,716

RSUs outstanding

–

PSUs outstanding

–

Options granted and outstanding

–

Pension

368,600

548,600

292,700

264,500

Realizable compensation subtotal

368,600

548,600

292,700

264,500

TOTAL REALIZED AND REALIZABLE

COMPENSATION

(based on 2015 year-end value)

3,844,448

4,160,493

4,936,636

2,436,216

TOTAL COMPENSATION AS REPORTED

IN THE SUMMARY COMPENSATION TABLE (based on grant date values)

5,245,590

5,917,347

5,099,097

4,720,325

• Base salary – salary amounts paid each year. Tim was awarded an annual base salary of $900,000 when he assumed the position of president and CEO on July 1, 2011. He received no salary increase in 2013, a 2% salary increase in 2014 and a 6.8% salary increase in 2015.

• Annual incentive pay – bonus amounts paid each year.

• RSUs paid out – Tim received one grant of RSUs when he became CEO in July 2011. They were paid out in Cameco common shares in July 2014

• PSUs awarded and paid out – amounts paid out on PSUs awarded in 2011, 2012 and 2013 that vested in 2013, 2014 and 2015.

• Options exercised – amount earned from options exercised from 2013 to 2015. Tim did not exercise any stock options in 2013, 2014 or 2015.

• RSUs outstanding – no RSUs were awarded between 2013 and 2015.

• PSUs outstanding – the outstanding PSUs granted in 2014 and 2015 have been given a zero value because they are performance-based awards that have not vested and may have a zero payout value when they vest.

• Options granted and outstanding – amount that could be earned upon exercise of options that were granted from 2013 to 2015 based on $17.07, the closing share price of Cameco common shares on the TSX on December 31, 2015. No options granted between 2013 and 2015 are in the money.

• Pension – pension values reported for 2013, 2014 and 2015 in the summary compensation table.

The table below gives a five-year look back at CEO compensation as disclosed in prior circulars and also compares the CEO’s compensation to the value earned by shareholders over the same period. We have indexed these values at $100 to provide a meaningful comparison. Tim Gitzel became president and CEO on July 1, 2011.


	COMPENSATION AWARDED¹	THREE-YEAR AVERAGE REALIZED AND REALIZABLE COMPENSATION AS AT DECEMBER 31, 2015²	PERIOD	VALUE OF $100
	COMPENSATION AWARDED¹		PERIOD	CEO	SHAREHOLDER

2015	$5,917,347	$3,093,626	Jan 1, 2013 to Dec 31, 2015	$53	$46

2014	5,099,097	2,757,473	Jan 1, 2012 to Dec 31, 2014	54	51

2013	4,720,325	2,770,902	Jan 1, 2011 to Dec 31, 2013	59	58

2012	4,772,534	3,023,578	Jan 1, 2010 to Dec 31, 2012	63	50

2011	6,651,250	3,053,874	Jan 1, 2009 to Dec 31, 2011	46	46

			Average	$55	$50

Tim’s base salary in 2011 increased from $714,000 to $900,000 when he became president and CEO on July 1, 2011. His 2011 compensation reflects what he was actually paid in base salary for all of 2011 and the value of special retention incentive awards of RSUs and stock options (as disclosed in the summary compensation table of our 2014 proxy circular).

The 2012 and 2011 amounts include compensation awarded to Jerry Grandey who was the CEO until June 30, 2011 and differs from the three-year average above because this number is calculated on a three-year rolling period.

58 CAMECO CORPORATION

Executive compensation

Compensation discussion and analysis


1. Approach Our executive compensation program is based on strong principles, a disciplined process and thorough research and analysis. Our program has three goals:			About the compensation mix We use financial and operational measures to assess performance for short- and long-term incentives. 60% of the 2015 long-term incentive vests based on performance.
1.	Attract, retain and motivate executives, who are operating in a highly-demanding, complex and competitive business environment.
2.	Establish a clear link between corporate performance and executive pay.
3.	Motivate executives to create shareholder value by:
	●	using total shareholder return as a performance measure
	●	rewarding them when they successfully achieve corporate and individual performance objectives over the short and long term
	●	ensuring a significant portion of their total compensation is at risk, reinforcing the importance of strong leadership and their ability to influence business outcomes and financial performance, and is tied to share value to align the interests of executives and shareholders.
COMPENSATION TARGETS We target base salaries and total compensation at the median of our comparator group with the flexibility to position executive pay within the competitive range of the median for target performance. The charts below show the 2015 target pay mix for total direct compensation for our named executives, and the amount of at-risk compensation.

2016 MANAGEMENT PROXY CIRCULAR 59

RESEARCH AND BENCHMARKING

We use national, provincial and industry compensation forecasts and benchmark our executive compensation against our comparator group for individual compensation components and total compensation by position. Performance, scope of the role, seniority and internal equity are also considered.

We engage an independent compensation consultant for advice and analysis to make sure our executive compensation is fair and competitive and we are balanced in our decision-making.

As a publicly-traded, global nuclear energy company based in Canada, we have no peers that are directly comparable, so the human resources and compensation committee, with the support of its independent consultant, established a comparator group of companies to assess compensation levels.

Comparator group

In 2015, we used one comparator group to benchmark our director and executive compensation and to assess relative performance.

The comparator group of 21 companies represents a cross-section of Canadian capital intensive companies from different sectors that are similar by size of assets, revenue, enterprise value and market capitalization (generally ranging from one-third to three times the size of Cameco). These companies were also selected because they are in regulated or relevant industries, in complex businesses, have operations in multiple geographic locations and jurisdictions, and a head office in Canada, which are the same principles and criteria we used to establish the comparator group beginning in 2009.


								NEW IN 2016
								NEW IN 2016
								Benchmarking compensation We are revising the compensation comparator group for 2016 to reflect changes in the industry and the sale of our interest in Bruce Power L.P. Goldcorp, Hudbay Minerals Inc., MEG Energy Corp. and New Gold Inc. are replacing Emera Inc., Fortis Inc., Sherritt International Corporation and Talisman Energy Inc. We used a multi-step evaluation process based on our existing criteria and focused on companies in the resource industry (mining in particular) that are similar in size and complexity and are a relatively good fit with the overall group. Our objective was to continue to have a robust and stable group of companies comparable by size and industry that are appropriate for assessing market levels of compensation. Assessing relative performance We will use the TSX 60 to benchmark our TSR performance under the PSU plan, rather than our compensation comparator group. The TSX 60 is an index of leading companies that reflects companies we compete with for shareholder investment and aligns with shareholder interests (see page 47 for details). This change affects PSU awards granted in 2016 and later.

60 CAMECO CORPORATION

SHARE OWNERSHIP

We require our executives to own Cameco shares so they have a vested interest in the company aligned with shareholders.

Our share ownership guidelines are a multiple of base salary:

●

CEO – 4 x base salary

●

senior vice-presidents – 2 x base salary

●

vice-presidents – 1 x base salary.

Executives must meet their ownership targets within five years of being appointed to the position. Sean Quinn was promoted to his position in 2014 and he has until 2017 to meet his ownership target. All of the other named executives meet their share ownership requirements.

If an executive is promoted to a higher level and has a higher share ownership target, he or she will have an additional three years to meet the increased target. Executives must use the after-tax proceeds from the payout of their PSU awards and the exercise of stock options to purchase additional Cameco shares until they have met the requirements.

In addition, named executives who received special grants of RSU awards receive Cameco shares when the RSUs vest, and they must hold them for two years after vesting or until they have met their share ownership target, whichever is longer.

The table below shows the number of shares held by our named executives at December 31, 2015. We calculate the target value of share ownership by using their 2015 base salary and the multiplier for their position. Share value is based on $17.07, the closing price of Cameco common shares on the TSX on December 31, 2015 or the executive’s purchase price, whichever is higher. See the notes to the table below for information about how we determine the PSU and RSU values.

Share ownership guidelines were reviewed as part of the compensation review and no changes are planned for 2016 because we believe our guidelines support best practices and align with the market generally.


NAME	2015 BASE SALARY ($)	MULTIPLE	TARGET VALUE OF OWNERSHIP ($)	CAMECO SHARES				QUALIFYING PSUs				RSUs		VALUE OF SHARE OWNERSHIP ($) (SHARES, RSUs AND QUALIFYING PSUs)	MEETS SHARE OWNERSHIP TARGET
NAME	2015 BASE SALARY ($)	MULTIPLE	TARGET VALUE OF OWNERSHIP ($)	NUMBER HELD (#)		VALUE ($)		NUMBER HELD³ (#)		VALUE⁴ ($)		NUMBER HELD⁵ (#)	VALUE⁶ ($)		MEETS SHARE OWNERSHIP TARGET

Tim Gitzel¹	1,000,000	4 x	4,000,000		181,968		3,726,383		65,560		1,119,109	–	–	4,845,492	Yes (121% of the target for the CEO)

Grant Isaac	550,000	2 x	1,100,000		36,156		690,383		20,520		350,276	34,240	292,238	1,332,897	Yes (121% of the target for the CFO)

Robert Steane	595,100	2 x	1,190,200		86,067		1,762,839		31,320		534,632	31,089	265,345	2,562,816	Yes (215% of the target for the COO)

Alice Wong	432,800	2 x	865,600		37,807		733,744		13,680		233,518	30,440	259,805	1,227,067	Yes (142% of the target for the position)

Sean Quinn²	416,000	2 x	832,000		18,738		498,571		9,869		168,467	–	–	667,038	On track (80% of the target for the position)

See Tim Gitzel’s profile on page 15 for the total number and value of the CEO’s shares and all PSUs, not just qualifying PSUs.

Sean Quinn was promoted to his position in April 2014 and has until April 2017 to meet his share ownership guideline.

This is the lesser of the number of the qualifying PSUs and the number of Cameco common shares, held by the named executive.

The value of the qualifying PSUs is the number multiplied by $17.07, the closing price of Cameco shares on the TSX on December 31, 2015.

RSUs were granted to Grant Isaac and Alice Wong on March 3, 2014 based on two times their 2013 base salary. RSUs were granted to Robert Steane on March 2, 2015 based on a value approximately equal to his 2015 base salary.

The value of the RSUs is the number multiplied by $17.07, the closing price of Cameco shares on the TSX on December 31, 2015 and net of an estimated 50% for taxes.

2016 MANAGEMENT PROXY CIRCULAR 61

2. Annual decision-making process

The board, human resources and compensation committee and management are involved in compensation decision-making. The committee is responsible for making compensation recommendations to the board for its approval.

The illustration below shows our process, the different inputs we use to determine compensation and the flow of information, recommendations and approval by our board.

LOGO

ASSESSING THE PROGRAM

The human resources and compensation committee believes that it is good practice to review our compensation programs each year and continued this practice in 2015 (read about the changes planned for 2016 in the message from the chair of the human resources and compensation committee starting on page 47).

The committee reviews all policies and programs relating to executive compensation, which involves:

●

establishing the annual corporate objectives to measure performance

●

determining the proposed base salaries, short-term incentive awards, grants of performance share unit awards and stock options

●

evaluating performance

●

reviewing and recommending executive compensation to the board for review and approval.

The committee retains an external consultant as an independent advisor on compensation matters who is also involved in the compensation review. Management retains a different external consultant as a general resource on human resources and other matters (see Compensation governance on page 40 for more information).

62 CAMECO CORPORATION

3. Measuring performance

Compensation decisions are based on corporate and individual performance, which drive our strategy. We are focused on our tier-one assets and profitably producing uranium products at a pace aligned with market signals to increase long-term shareholder value, and to do that with an emphasis on safety, people and the environment.

CORPORATE PERFORMANCE

We assess our corporate performance by how well we achieve both financial and operational goals, and group our corporate objectives into our four measures of success:

● outstanding financial performance

● safe, healthy and rewarding workplace

● clean environment

● supportive communities.

The board approves our corporate objectives every year, as recommended by management and following reviews by the human resources and compensation and safety, health and environment committees. These objectives support our strategic plan.

PSU awards granted in 2013 were measured against three performance targets. They vested on December 31, 2015 and were paid out early in 2016 based on our performance against those three targets for the three-year performance period (see pages 74 through 76 for the performance assessment and details of the payout).

Performance measures under our STI and PSU plans are linked to our strategic plan to ensure our long-term growth and focus on creating shareholder value. The better we perform, the greater the potential to realize a higher payout value.

INDIVIDUAL PERFORMANCE

The board assesses the CEO’s individual performance using the annual corporate objectives and recommendations by the human resources and compensation committee, which are based on:

● overall corporate performance

● implementation of the CEO’s strategies to increase shareholder value

● achievement of the CEO’s individual performance objectives.

The committee reviews reports from management and the CEO’s self-assessment and consults with its compensation consultant before making its recommendation to the board.

At the beginning of the year, the CEO establishes individual performance objectives for each senior vice-president, allocating and weighting the annual corporate performance objectives by individual based on the executive’s influence in a given area.

At the end of the year, the CEO compares actual performance to the targets and prepares a report on each senior vice-president that summarizes their individual performance and leadership effectiveness, which is discussed with the committee. The committee then consults with its compensation consultant, and makes its recommendations to the board.

The board approves all decisions on executive compensation. See page 77 for details about the compensation decisions in 2016.

MEASURING SUCCESS

Our four measures of success allow us to proactively address the financial, social and environmental aspects of our business. We believe that each is integral to our overall success and that, together, they will ensure our long-term sustainability.

Linking pay to performance

All of the corporate objectives become the CEO’s individual objectives, and are allocated among the senior vice-presidents to form part of their individual objectives. The CEO’s individual objectives also include leadership expectations established by the board.

The corporate objectives are also used as performance measures under our short-term incentive (STI) plan. The table beginning on page 72 lists our 2015 corporate objectives and weightings, and the threshold, target, maximum and actual performance against these objectives under the STI plan.

Under our PSU plan, we assess performance over a three-year period based on three objectives, including relative TSR. These objectives were recommended by management, reviewed by the human resources and compensation committee and then recommended to the board for approval. The table on page 68 sets out the measures for PSUs granted in 2015.

2016 MANAGEMENT PROXY CIRCULAR 63

4. Compensation components

Five components make up total executive compensation:


● Base salary
● Short-term incentive (STI)		at-risk compensation
● Long-term incentive (LTI)		at-risk compensation
● Pension
● Group benefits


TYPE OF COMPENSATION	FORM	PERFORMANCE PERIOD	HOW IT IS DETERMINED	RISK MANAGEMENT FEATURES

FIXED COMPENSATION	Provides market competitive level of fixed compensation

Base salary (page 65)	Cash	One year	Based on market competitiveness among the comparator group, individual performance, experience, scope of the role and internal equity.	Fixed pay, paid throughout the year, and provides a certainty at a base level for fulfilling their responsibilities. Represents 20-28% of target direct compensation of the named executives.

VARIABLE (AT-RISK) COMPENSATION	STI compensation encourages achievement of pre-established corporate and individual performance objectives. Payout is subject to a clawback policy

Short-term incentive (page 65)	Cash	One year	Focuses on specific annual objectives. Target award based on market competitiveness among the comparator group and other factors. Actual award based on corporate and individual performance.	Provides a balanced focus on short-term performance based on a pre-determined set of performance metrics weighted and scored in our scorecard. Actual payout on all metrics could be 0-200%. Targets and results are approved by the board. Targets are tested to determine the level of stretch. Using 12 balanced and diverse performance metrics reduces the risk associated with emphasizing a single (or limited) performance measure.

VARIABLE (AT-RISK) COMPENSATION	LTI compensation provides incentive to achieve longer-term performance and opportunity to receive equity-based compensation aligned with shareholder interests. Payout is tied to Cameco share performance and subject to a clawback policy

Long-term incentive (page 67)	Performance share units	Three-year term, with vesting at the end of three years	Focuses on longer-term objectives (three years). Target award based on market competitiveness of the LTI package among the comparator group and other factors. Actual payout based on our overall performance, combining a balanced scorecard of: ● average relative realized uranium price ● tier-one production ● three-year relative total shareholder return. At the board’s discretion, payment is made in Cameco shares purchased on the open market, or in cash.	Performance is measured on previously established targets. Three-year vesting period maintains longer term focus for decision-making and management of business. Vesting and payout eligibility capped. Payout on the relative TSR metric could be 0-200% and on the other metrics could be 0-150%. Stretch targets are based on an improvement over the comparator group and market.

	Stock options	Eight-year term, with one-third vesting each of the first three years starting on the first anniversary of the grant date	Target award based on market competitiveness of the LTI package among the comparator group and other factors. The final realized value is based on the appreciation of Cameco’s share price.	Provides a balanced incentive to take appropriate risks. Three-year vesting eligibility period and eight-year term maintain longer-term focus for decision-making and management of business.

	Restricted share units	Typically a three-year term, with vesting at the end of three years	Mainly used as a targeted retention tool in individual circumstances. At the board’s discretion, payment is made in Cameco shares purchased on the open market, or in cash.	Vesting over time supports retention and longer-term focus for decision-making.

64 CAMECO CORPORATION


TYPE OF COMPENSATION	FORM	PERFORMANCE PERIOD	HOW IT IS DETERMINED	RISK MANAGEMENT FEATURES

Pension (page 70)	Defined contribution pension plan Supplemental executive pension program (defined benefit)	Ongoing	Based on market competitiveness and legislative requirements.	Tax efficient way to provide employment benefits. Provide security for employees and their families.

Group benefits (page 70)	Group insurances, health and dental, income protection	Ongoing	Based on market competitiveness.

We also have employment agreements with our named executives (see page 86).

BASE SALARY

Typically we target base salaries at the median of the comparator group. We review base salaries every year, and compare them to similar positions in the comparator group. Then we review our corporate performance, the individual’s performance, experience and scope of the role and internal equity to make sure any increases are fair and balanced.

Salary adjustments for our named executives generally go into effect as of January 1 (see pages 71 and 77 for details about base salary adjustments for the named executives in 2015 and 2016).

SHORT-TERM INCENTIVE PLAN

The STI plan gives executives the opportunity to earn a cash bonus based on their success in achieving pre-established corporate and individual performance targets for the year.

For named executives, corporate performance is weighted higher than individual performance. Awards range from 0 to 150% of the STI targets established for the year, based on the level of performance. The company has to meet a minimum level of performance (threshold) for each measure before being eligible for a payout of 50% on that measure. Achieving target produces 100% payout on that measure. The maximum payout on any STI target is 150%. There is no payout if performance is below threshold. The targets are considered challenging or stretch.

The human resources and compensation committee sets the target STI for each executive based on position, internal equity and market competitiveness. The table below shows the current target levels and weightings used to establish the actual awards. The weighting of corporate and individual performance is the same for all executives, which promotes executive teamwork and better aligns the interests of executives and shareholders. Actual bonuses are based on performance for the year and paid in the following year after our year-end results are released.

The STI target for the CFO was adjusted as of August 1, 2015 to recognize the broader scope of his role and additional responsibilities following the resignation of Ken Seitz.


POSITION	STI TARGET FOR 2015 (% OF BASE SALARY)	CORPORATE PERFORMANCE WEIGHTING	INDIVIDUAL PERFORMANCE WEIGHTING

CEO	100%	80%	20%

Senior vice-presidents	50 to 75%	80%	20%

2016 MANAGEMENT PROXY CIRCULAR 65

Determining the payout

We use a balanced scorecard to broadly measure performance and give participants a clearer picture of their potential award. The scorecard includes all of the corporate objectives and applies a weighting to each one, which are put into the formula below. The objectives are tied to our four measures of success. Individual performance is also measured.

We calculate STI as follows:

LOGO

Measuring corporate performance

The board establishes the measures and weightings every year based on the recommendation of the committee. These objectives represent our four measures of success, and are grouped into two sets of measures that each add up to 100%. The product of these two sets of measures is the corporate performance multiplier. See pages 71 through 73 for the objectives and results of each measure for the 2015 STI.

The human resources and compensation committee consults with the safety, health and environment committee on our performance related to safety, health and the environment and related corporate results that is required as part of the process in determining the STI awards.

LOGO

Measuring individual performance

Assessment of individual performance is based on the executive’s contribution to corporate performance and individual performance measures, and these assessments are approved by the committee.

The committee determines the measures and weightings for assessing the CEO’s performance, while the CEO establishes the same for the named executives.

Using discretion

The board can increase or decrease the amount of the STI payment when there are significant external challenges or opportunities that were not contemplated or reasonably expected when the objectives were set. It cannot exceed the overall maximum payout of 200%.

66 CAMECO CORPORATION

LONG-TERM INCENTIVE

LTI provides executives and management employees the opportunity to receive equity-based compensation to drive longer-term performance. Both the committee and the board believe equity-based compensation is important for motivating employees to deliver strong longer-term performance, aligning their interests with those of our shareholders and providing pay that is competitive with the market.

LTI is awarded to executives as PSUs and stock options with RSUs granted generally for retention purposes. This mix of LTI vehicles allows us to use different vesting criteria, eligibility and performance measures for at-risk compensation. Beginning in 2016, we will measure relative TSR performance against the TSX 60 rather than our comparator group (see page 60 for details). No changes are planned for either stock options or RSUs in 2016.

AWARD

HOW IT’S

USED

BUSINESS

FOCUS

WHO

PARTICIPATES

VESTING

HOW IT’S

SETTLED

ALIGNED WITH
SHAREHOLDERS

PSUs

(page 68)

60% of target

LTI award

Performance vesting criteria

Directly linked to long term, absolute and relative performance and share price

Reduces the number of option awards, lessening the dilutive impact to shareholders

Vice-presidents and

above

Based on financial and operating performance and TSR at the end of

a three-year period

Cameco shares purchased on the market or cash

Motivates executives to create shareholder value that can be sustained over a longer period on both an absolute and relative basis

Non-dilutive

Stock options

(page 69)

40% of target LTI award

Ties a portion of future compensation to the long-term performance of our shares

Vice-presidents and above

Vest over three years, expire after eight years

Option to buy Cameco shares issued from treasury at the exercise price

Motivates executives to increase shareholder value

Restricted share units

(page 70)

Mainly for targeted retention

Ties a portion of future compensation to the longer term performance of our shares

Select executives

At the end of three years

Cameco shares purchased on the market or cash

Motivates executives to increase shareholder value

Non-dilutive

Determining the mix

The committee evaluates the mix of options and PSUs every year, and discusses national trends with its compensation consultant, including the importance of stock options in our industry and the emphasis Canadian public companies continue to place on stock options and other equity-based awards. The committee takes into account previous awards of PSUs, options and RSUs when it considers new LTI grants.

Governance concerns have been expressed about the use of stock options and the committee regularly reviews the merits of keeping stock options in our compensation program. Stock options are a tax-efficient incentive focused on share price performance that provides a longer-term horizon for at-risk compensation and are a common form of LTI in our comparator group.

The committee set the 2015 target mix of the expected value of the long-term incentives at 60% PSUs and 40% options, so a high percentage of LTI vests based on performance. Companies in our comparator group typically have a lower portion of performance-based LTI.

LTI awards are granted every year on March 1 (or the next business day if March 1 falls on a weekend) after we publicly disclose our results for the previous fiscal year. If we impose a trading blackout period that includes March 1, we will make the grants on the next trading day after the blackout period has ended.

The board can make special LTI grants at other times during the year, for retention or other special reasons.

Non-executive employees (union and non-unionized) participate in the employee share ownership plan (ESOP).

We make an annual base level of contribution to the plan, and match 50% of employee contributions up to a maximum of 1.5% of an employee’s base salary. Executives do not participate in ESOP because they participate in the PSU plan.

2016 MANAGEMENT PROXY CIRCULAR 67

Performance share unit plan

The PSU plan design is described in the table on the previous page. The formula below shows how the performance factors determine the final number of PSUs on vesting.

LOGO

Each PSU represents an opportunity to receive a Cameco common share purchased on the open market at the end of the three-year performance period (or cash, at the board’s discretion). PSUs do not earn dividend equivalents until they vest.

We use a scorecard to align senior management’s compensation with their ability to improve corporate performance over the three years. Since 2014, performance measures are based on a combination of two corporate measures, one absolute and one relative, and relative TSR, which has the highest weighting of the three measures. The PSUs measure absolute and relative performance so management maintains a balanced, longer-term focus on delivering shareholder value.

The human resources and compensation committee reviews the performance targets every year and recommends them to the board for approval. The targets are set on the basis that they are challenging to achieve. The table below shows the targets and weightings for PSUs awarded in 2015.


TARGET	WEIGHTING

Average relative realized uranium price 0 to 150%	30%	Achieve an average realized price for uranium sales for a three-year period that exceeds the weighted average price for sales in two independent industry benchmarks for the same period: ● EIA (US energy information administration) price for sales in the US ● ESA (Euratom supply agency) price for sales in Europe. The payout at the end of the three-year period is based on 2014, 2015 and 2016 sales due to timing of when pricing information is available.	Measures performance relative to our competitors. Consistently achieving higher prices than our competitors is a stretch target because uranium is a fungible product and we need to distinguish our uranium from our competitors to achieve a premium price. We use these pricing indicators because they are publicly-available measures set by independent third parties.

Tier-one production 0 to 150%	30%	Produce 71.5 million pounds of U₃O₈ (our share) from tier-one mine operations in the three-year period from 2015 to 2017.	Measures absolute performance and ties directly to our strategic plan.

Our three-year average total shareholder return (TSR) 0 to 200%	40%	Achieve three-year average TSR at the median of the three-year average TSR achieved by companies in our comparator group (see below for details about the changes beginning in 2016). We define TSR as the change in price of a Cameco common share, including reinvestment of dividends, on the TSX during the three-year period from 2015 to 2017.	Measures performance relative to our comparator group.

PERFORMANCE MULTIPLIER Maximum of 170%		The overall performance factor is the sum of the three weighted targets above.

INITIAL GRANT OF PSUs		Notional units awarded at the beginning of the three-year performance period.

PSU PAYOUT		Payout amount is the initial number of PSUs granted, multiplied by the PSU performance multiplier, exchanged for the equivalent number of Cameco common shares.

68 CAMECO CORPORATION

Performance multiplier

The performance multiplier for each measure depends on our performance against each target. The table below shows how we assess performance against each measure.

Threshold performance for TSR is the 35^th percentile, which is in line with market practice ranging between the 25^th and 40^th percentiles for threshold performance. TSR is a good reflection of performance when comparing like companies in a comparable industry and the same commodity. As companies in our comparator group are not affected by the price of uranium like Cameco, we believe that TSR is a challenging performance target in the current depressed uranium market, and achieving threshold performance of the 35^th percentile of our comparator group to trigger at 40% payout on this measure was challenging at the time these PSU targets were set. The 2013 PSUs that vested at the end of 2015 (measures are shown in the table below) will be the second PSUs since we introduced a balanced scorecard where relative TSR is higher than the 35^th percentile.


PERFORMANCE MEASURES (AND WEIGHTING)	THRESHOLD PERFORMANCE	IF WE ACHIEVE:	THEN THE PERFORMANCE MULTIPLIER IS:

Average realized uranium price (30%)	80% of our target of 100%	Less than 80% of the corresponding target	0%

		80 to 120% of the corresponding target	50 to 150% (in a straight-line interpolation)

Increased production (30%)		More than 120% of the corresponding target	150%

Our three-year average TSR (40%)	35th percentile (target is the 50th percentile)	Below the 35th percentile among our comparator group	0%

		From the 35th to the 50th percentile	40 to 100% (in a straight-line interpolation with 100% at the 50th percentile)

		50th percentile	100%

		50th to 75th percentile	100 to 200% (in a straight-line interpolation)

		Higher than the 75th percentile	200%


		NEW IN 2016
		NEW IN 2016
We will measure our relative TSR performance under the PSU plan using the TSX 60, rather than our comparator group. Our analysis revealed that Cameco’s share price tracks more closely with the broader market. The TSX 60 was selected as an appropriate benchmark because it is an index of leading companies that reflects companies we compete with for shareholder investment and aligns with shareholder interests. The change applies to PSU awards granted in 2016 and later.

Vesting

Payout formulas have been established for each performance measure, taking into account different levels of threshold performance to determine the performance multiplier and to cap payouts to eliminate any excessive risk-taking.

Applying discretion

The committee can make adjustments at its discretion so that payouts appropriately reflect performance and discourage excessive risk-taking. We fully disclose any use of discretion, together with the rationale and the particular circumstance.

Stock option plan

We provide a stock option plan for executives at the vice-president level and above. The committee takes into account previous equity awards when it considers new grants of options.

The board fixes the exercise price of an option at the time of the grant at the TSX closing price of Cameco common shares on the trading day immediately before the date of the grant.

If an option holder leaves the company, any unvested options will vest during a specific period of time depending on the reason for leaving. Vested options can be exercised during the same period. See Termination and change of control benefits starting on page 86 for details.

No more than 10% of our total issued and outstanding shares can be issued to insiders in a year under the stock option plan and any other security-based compensation arrangement. No more than 5% of our total issued and outstanding shares can be issued to any one person. Options cannot be transferred to another person (other than by will or intestate succession).

2016 MANAGEMENT PROXY CIRCULAR 69

Making changes

The board can change, suspend or terminate the plan subject to the laws that apply, including but not limited to the rules, regulations and policies of any stock exchange where our shares are listed. Some changes may require approval from shareholders or a governmental or regulatory body.

Neither the board, the human resources and compensation committee nor shareholders can alter or affect the rights of an option holder in a negative way without his or her consent, except as described in the plan. See Appendix C for information about the changes that must be approved by shareholders.

According to the TSX rules for equity compensation plans, there were no plan changes in 2015.

International employees

Our non-North American stock option plan (phantom plan) allows eligible employees of our international subsidiaries to participate in our overall growth and profitability in permitted jurisdictions.

The phantom plan has the same objectives and features as our stock option plan, except that these option holders have the right to receive cash payments rather than Cameco shares. The cash amount equals the difference between the closing market price of Cameco shares on the day prior to the exercise date and the exercise price of a phantom stock option.

Restricted share units

The board grants RSUs from time to time to senior management mainly as a targeted retention tool on the recommendation of the committee. RSUs typically vest at the end of three years.

Management employees below the level of vice-president receive annual grants of LTI awards from the RSU plan. These RSUs vest one-third each year over three years.

Each RSU represents one notional common share. The board has discretion to decide whether the payout is in Cameco shares purchased on the open market, or in cash based on the weighted average closing price of Cameco shares on the TSX for the 20 trading days immediately before the vesting date, after deducting withholding taxes.

The summary compensation table on page 78 gives information about the grant date value of options awarded to the named executives over the past three years. The Incentive plan awards table on page 81 gives information about the 2015 year-end value of the named executives’ unexercised options and PSUs and RSUs that have not vested.

PENSION

Pensions are an integral part of total compensation and a cost-effective and important benefit for attracting and retaining executives and other employees. Executives participate in a registered base plan and a supplemental program.

Registered base plan

We have a registered defined contribution plan for eligible employees. All of the named executives participate in our defined contribution plan. We contribute 12% of the named executive’s pensionable earnings to the defined contribution plan every two weeks up to the annual dollar limit allowed by the Canada Revenue Agency. The maximum dollar amount for 2015 was $25,370.

Supplemental program

This non-contributory supplemental defined benefit retirement plan is designed to attract and retain talented executives over the longer term. It provides a retirement income that is commensurate with the executive’s salary and offsets the registered pension plan limits under the Income Tax Act (Canada). The plan was reviewed as part of the compensation review and no changes are planned for 2016.

All of our Canadian-based management at the vice-president level and above participate in the supplemental retirement plan (see Pension benefits on page 84 for more information).

BENEFITS

Group benefits

We provide group benefits to all our employees. The named executives participate in an enhanced program and receive coverage similar to those offered by companies in our comparator group. These benefits include life insurance, long-term disability insurance, extended health care, dental care and emergency medical coverage.

Perquisites

Our named executives also receive additional benefits as part of their total compensation, similar to those offered by companies in our comparator group. These include a financial and tax planning allowance, a vehicle allowance, an executive medical plan and salary protection in the event of short-term disability.

5. Program changes for 2016

We conduct a comprehensive review of our executive compensation program, policies and practices every three years. You can read about the compensation review in 2015 and the program changes for 2016 compensation in the message from the chair of the human resources and compensation committee beginning on page 47 and the components discussion beginning on page 64.

70 CAMECO CORPORATION

6. 2015 Performance and compensation

BASE SALARY

The named executives received salary increases of 4% for 2015, except for Tim Gitzel who received a 6.8% increase to align his compensation with our comparator group. Grant Isaac received a further 13% increase effective August 1, 2015 to recognize the broader scope of his role and additional responsibilities he assumed after Ken Seitz resigned.

SHORT-TERM INCENTIVE PLAN

The STI award is based on targets set for each named executive as a percentage of base salary and actual corporate and individual performance. These percentages are set slightly below those of our comparator group. The plan design is based 80% on corporate performance and 20% on individual performance for all executives.

Corporate performance was assessed at 98% for 2015, compared to 119.2% for 2014.

STI awards are reported in the summary compensation table on page 78, and you can find a complete description of the plan design beginning on page 65.

Corporate performance

Our targets are a combination of financial and non-financial measures and are directly linked to our strategy. The targets represent our four measures of success – measures that highlight the importance we place on our financial and operational results and the social and environmental aspects of our business as a responsible corporation and global leader in corporate social responsibility.

LOGO

Our 2015 STI performance was assessed on 12 specific targets, covering financial performance and other measures that encourage a balanced focus and are designed to motivate executive behaviour and drive compensation. Detailed STI performance results and weightings are reported in the table on the following page.

2015 results

Cameco’s performance in 2015 was strong highlighted by our operational performance and the ramp up at Cigar Lake. Cameco’s total 2015 production at Cigar Lake exceeded our target by 1.3 million pounds (100% basis) or 13%. Our focus on cost management is reflected in our financial results. We also delivered solid results in terms of our supportive communities, health and safety and clean environment commitments. While we did not achieve all of our targets in 2015, we excelled in many areas as outlined below.

About the payouts

Threshold performance provides a 50% payout on that measure, while performance at target produces a 100% payout and maximum performance provides a 150% payout on that measure.

In 2015, adjusted net earnings and cash flow from operations were expected to decline compared to 2014. Because of the expected decline year-over-year, we removed the upside leverage for payout of these measures, and the pay-for-performance level achieved was capped at 120%.

There is no payout if performance is below threshold. We have a 200% cap on payouts for performance above the maximum to mitigate excessive risk-taking.

2016 MANAGEMENT PROXY CIRCULAR 71

2015 COMPENSABLE TARGETS

OBJECTIVE/TARGET

THRESHOLD

TARGET

MAXIMUM

ACTUAL PERFORMANCE

PAYOUT

PERCENTAGE

PERFORMANCE

WEIGHTING

PAYOUT

OUTSTANDING FINANCIAL PERFORMANCE (85% weighting)

Earnings measures

Achieve targeted adjusted net earnings and cash flow from operations (before working capital changes).

$246 million

$307 million

$368 million

Adjusted net earnings¹ were $267 million¹, 87% of the target.

= 67.5% payout x 22.5% =

LOGO

$427 million

$534 million

$641 million

Cash flow from operations (before working capital changes) was $553 million¹, 3.5% higher than target.

= 103.5% payout x 22.5% =

LOGO

Capital management measures

Execute capital projects within the approved scope cost and schedule (measured by approved project expenditure and select criteria milestones).

1.15

(over approved budget)

0.95 to 1.05

0.90

(under

approved

budget)

Our cost performance was at budget, resulting in 100% achievement of target.

= 100.0% payout x 10% =

LOGO

3 months late

(behind

schedule)

within 1

month of

target

3 months early

(ahead of

schedule)

Our project milestones were all on or slightly ahead of schedule in 2015.

= 101.0% payout x 10% =

LOGO

Cigar Lake measure

Achieve production of 10 million pounds (100% basis) from Cigar Lake in 2015.

6 million pounds

(100% basis)

10 million

pounds

(100% basis)

12 million pounds

(100% basis)

Production from Cigar Lake in 2015 was 11.3 million pounds (100%), 13% higher than target.

= 132.5% payout x 20% =

LOGO

SUPPORTIVE COMMUNITIES (15% weighting)

Meet all of our business development obligations under our Collaboration Agreements based on two focused targets.

65%

68% to 71%

75%

In 2015, 76% of northern services were sourced from Northern Saskatchewan vendors. This exceeded our target maximum.

= 150.0% payout x 7.5% =

LOGO

35%

40%

45%

In 2015, 63% of the capital projects construction spend was sourced from Northern Saskatchewan vendors. This exceeded our target maximum.

= 150.0% payout x 7.5% =

LOGO

SAFE, HEALTHY AND REWARDING WORKPLACE (70% weighting)

Strive for no lost-time injuries at all Cameco-operated sites and maintain a long-term downward trend in combined employee and contractor radiation doses, and injury frequency and severity (measured by TRIR² and DART²).

1.80

1.35 or lower

0.90

TRIR² was higher than our 2015 target, resulting in 87.4% achievement of target.

= 74.7% payout x 20% =

LOGO

1.15

0.75 or lower

0.45

DART² was higher than the target, resulting in 91.6% achievement of target.

= 88.7% payout x 20% =

LOGO

Injury rates trended downward across the company and average radiation doses remained low and stable.

If a fatality or permanent disability occurs, the payout under this metric is zero.

72 CAMECO CORPORATION

2015 COMPENSABLE TARGETS

OBJECTIVE/TARGET

THRESHOLD

TARGET

MAXIMUM

ACTUAL PERFORMANCE

PAYOUT

PERFORMANCE

WEIGHTING

PAYOUT

Attract and retain the employees needed to support operations and growth.

6.8%

5.7%

4.6%

Our 2015 overall voluntary turnover rate of 4.93% resulting in 113.5% achievement of target.

= 133.8% payout x 15% =

LOGO

15.0%

12.5%

10.0%

The turnover rate for new hires within the first year of employment was 14.75%, resulting in 82.0% achievement of target.

= 55.0% payout x 15% =

LOGO

CLEAN ENVIRONMENT (30% weighting)

Achieve a decreasing trend for environmental incidents, measured as less than the long-term average (measured by reportable incidents and significant environmental incidents).

41 to 23

There were 31 reportable incidents, within the target performance range. There were no significant environmental incidents in 2015.

= 100.0% payout x 30% =

LOGO

If an incident occurs that results in moderate or significant environmental impacts or current and future remediation costs of greater than or equal to $1 million or which has a reasonable potential to result in significant negative impact on the company’s reputation with our major stakeholders, the payout under this metric is zero.

LOGO

OVERALL 2015 STI PERFORMANCE

Our corporate performance multiplier of 98% reflects our solid performance in 2015.

LOGO

We use adjusted net earnings and cash flow from operations (before working capital changes) as a more meaningful way to compare our financial performance from period to period. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS, and they should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. Other companies may calculate these measures differently. The adjusted net earnings and cash flow from operations amounts in the 2015 compensable targets table are different than what are reported in our 2015 annual management discussion and analysis (2015 MD&A). To calculate adjusted net earnings for compensation purposes, we start with adjusted net earnings as reported in our 2015 MD&A, then we further adjust for variances in foreign exchange rates as compared to budget. For further details regarding how we calculate adjusted net earnings in our 2015 MD&A, see page 25 of that document. To calculate cash flow from operations (before working capital changes) for compensation purposes, we start with cash provided by (used in) continuing operations (after working capital changes) as reported on page 24 of our 2015 MD&A and add back the changes in non-cash working capital of $93 million, then we further adjust for variances in foreign exchange rates and Canada Revenue Agency income tax reassessment payments as compared to budget. For more information on non-cash working capital changes, see note 24 to our audited 2015 financial statements.

Occupational Safety and Health Administration (OSHA) safety metrics, total recordable incidence rate (TRIR) and days away, restricted or transferred (DART), were adopted by the company to continue to drive improvements in safety performance. TRIR is a measure of the rate of “recordable” workplace injuries. Examples of “recordable injuries” are a medical treatment (other than first aid), restricted work, lost-time and other specific injuries such as 10 decibel hearing loss, loss of consciousness and broken bone. DART is a measure of the rate of workplace injuries and illnesses that require employees to miss work, perform restricted work activities or transfer to another job within a calendar year.

2016 MANAGEMENT PROXY CIRCULAR 73

Individual performance

Individual CEO performance was measured on the following core measures set for 2015, similar to those set in previous years:

Key operating results

Strategic change initiatives

Leadership effectiveness

The committee can also add any other performance measures it deems appropriate

The committee used these same measures to assess Tim Gitzel’s performance for 2015, and reviewed overall corporate performance, implementation of our strategy to achieve shareholder value, the recommendations from the compensation consultant and the CEO’s own self-assessment in developing its recommendation for the board.

The board discussed the results of the CEO assessment and considered the committee’s recommendation during an in camera session without management present before approving the CEO’s 2015 STI award.

The CEO decides which individual performance measures will be used for the other executives, sets the weightings

for each, and conducts a performance assessment for each senior vice-president. Senior vice-presidents assess the performance of vice-presidents. For each of the senior vice-presidents, the CEO provided a detailed assessment of their performance, particular achievements and leadership. The committee considered these assessments in light of the key operating results for 2015 and approved the CEO’s recommended performance assessments for each of the senior vice-presidents.

LONG-TERM INCENTIVE PLAN

Each LTI grant is based on individual performance, the level of the position, internal equity and overall market competitiveness. The LTI grant to executives in 2015 was benchmarked to the median of the comparator group. LTI awards are reported in the Incentive plan awards table on page 81.


POSITION	LTI AWARD (% OF BASE SALARY)		ACTUAL % OF PSUs AND OPTIONS GRANTED IN 2015 (PSUs/OPTIONS)

President and CEO		325		60/40

Senior Vice-President and Chief Financial Officer		200		60/40

Senior Vice-President and Chief Operating Officer		250		60/40

Senior Vice-President and Chief Corporate Officer		150		60/40

Senior Vice-President, Chief Legal Officer and Corporate Secretary		150		60/40

Senior Vice-President and Chief Commercial Officer		200		60/40

The table on page 68 explains the targets and weightings for PSUs awarded in 2015.

PAYOUT OF 2013 PSU AWARDS

LOGO

PSUs granted on March 1, 2013 were for the three-year performance period from January 1, 2013 to December 31, 2015.

74 CAMECO CORPORATION

The calculated payout of the 2013 PSU awards was 123.2% of the number of PSUs granted and the payout was made in March 2016. The following table shows the threshold, target and maximum for each objective and our results against the three performance measures under the plan at the end of the performance period.

THREE-YEAR RESULTS (ENDING DECEMBER 31, 2015)

PERFORMANCE

MULTIPLIER

CORPORATE OBJECTIVE/TARGET

THRESHOLD

TARGET

MAXIMUM

ACTUAL PERFORMANCE

PERFORMANCE WEIGHTING

Average realized uranium price

0 to 150%

Achieve an average realized price for uranium sales for a three-year period that exceeds the weighted average price for sales in two industry benchmarks for the same period – the EIA price for sales in the US and the ESA price for sales in Europe.

The 2013 grant is based on 2012, 2013 and 2014 sales due to timing of when pricing information is available.

80%

of target

100%

of target

At or above
120% of
target

Achieved an average realized price for uranium sales of $47.78, slightly above the weighted average price for sales in two industry benchmarks for the same period.

$38.01

$47.51

$57.01

100.6%

achievement

= 101.5% payout x 30% =

LOGO

Increased production

0 to 150%

Add 3.8 million pounds U₃O₈ cumulative incremental production in the three-year period 2013 to 2015, for target actual production of 71 million pounds U₃O₈ (our share).

80%

of target

100%

of target

At or above
120% of
target

Achieved 96.9% of our production for a total of 68.8 million pounds.

64.1 million pounds

80.1 million pounds

96.1 million pounds

94.0%

achievement

= 85.0% payout x 30% =

LOGO

Our three-year average total shareholder return (TSR)

0 to 200%

Achieve three-year average TSR that is the median of the three-year average TSR achieved by companies in the comparator group in effect at the time. We define TSR as the change in price of a Cameco common share, including reinvestment of dividends, on the TSX for the three-year period 2013 to 2015.

At the 35^th percentile

At the 50^th percentile

At or above

the 75^th
percentile

Three-year average TSR was at the 67^th percentile of our comparator group for the three-year vesting period from 2013 to 2015.

For the second time since we introduced the balanced scorecard for the program, our three-year average TSR achieved better than threshold performance.

P35

P50

P75

P67

achievement

= 168.0% payout x 40% =

LOGO

PSU PERFORMANCE MULTIPLIER

Sum of the three weighted factors

LOGO

2016 MANAGEMENT PROXY CIRCULAR 75

Relative performance

The 2013 PSU awards vested based on performance conditions that were set at the time of the grant and included an increase in the weighting of the TSR metric from 30% to 40% to reinforce the link between pay and performance.

We assessed our TSR performance relative to our comparator group at the time the awards were granted. The group consisted of 15 companies that we used to benchmark compensation generally. The group has since been reduced from 15 to 13 companies due to acquisitions that occurred since the time of grant.

COMPARATOR GROUP

Agnico-Eagle Mines Ltd.

Agrium Inc.

Emera Inc.

Enerplus Resources Fund

First Quantum Minerals Ltd.

Fortis Inc.

Kinross Gold Corp.

Lundin Mining Corp.

Methanex Corp.

Potash Corp. of Saskatchewan

Sherritt International Corporation

TransAlta Corp.

Yamana Gold, Inc.

Our three-year average TSR for 2013 to 2015 was at the 67^th percentile of companies in the comparator group.

Grant value vs. payout value

The grant value of the PSUs in 2013 was based on $22.00, our closing share price on the TSX on the day prior to the grant (as disclosed in the summary compensation table of our 2014 proxy circular).

The payout amount is the initial number of PSUs granted, multiplied by the PSU performance multiplier (calculated at a payout of 123.2% of the number of PSUs granted). This results in a payout of 92.5% of the original grant date value based on performance and share price.

The table below shows the calculation of the payout on March 1, 2016 for each named executive. The value of the payout is based on $16.51, the actual average purchase price of our common shares purchased on the TSX on behalf of the named executives on March 1, 2016. Ken Seitz forfeited his outstanding PSUs and RSUs when he resigned from Cameco in 2015.

(MULTIPLIER x WEIGHTING)

NAME

2013 PSU AWARD

(# OF UNITS )

AVERAGE
REALIZED
URANIUM PRICE

INCREASED
PRODUCTION

OUR THREE-
YEAR AVERAGE
TSR

VALUE OF TOTAL

2013 PSU

PAYOUT ($)

Tim Gitzel

75,100

1,527,893

Grant Isaac

25,000

508,615

Robert Steane

38,300

(101.5% x 30%

85.0% x 30%

168.0% x 40%)

779,205

Alice Wong

16,700

339,765

Sean Quinn

6,430

130,820

The next table shows the vesting history of PSUs awarded to our named executives and paid out over the past three years. Awards have vested below target in one of the last three years and above target this year and last, highlighting the at-risk structure and link between pay and performance.


PSU_S AWARDED IN	VESTED AS A % OF TARGET	PAID OUT IN SHARES, AFTER DEDUCTING WITHHOLDING TAXES
2013	123.2%	March 2016
2012	118.6%	March 2015
2011	68.5%	March 2014

76 CAMECO CORPORATION

7.	2016 Compensation decisions

The human resources and compensation committee reviewed base salaries in the context of the expanded roles of the named executives in light of the resignation of Ken Seitz.

Management is confident that each executive is able to assume additional responsibilities and effectively carry out their mandates to support Cameco’s strategy.

BASE SALARY

The named executives received the following salary increases for 2016:

●

2.5% for Tim Gitzel to align with the market median

●

2.75% for Robert Steane in recognition of his significant experience in the role

●

2.75% for Alice Wong to align with the market median and to recognize the increased scope of her role

●

3.38% for Sean Quinn to align with the market median and to recognize the increased scope of his role.

All of the adjustments position the salaries within a competitive range of the market median and consider sustained long-term performance, scope of the position, experience in the role and internal equity.

No 2016 salary increase was made for Grant Isaac as his salary was increased by 13% effective August 1, 2015.

SHORT-TERM INCENTIVE PLAN

Decisions about the 2016 STI award will be made in February 2017, once our 2016 results are finalized and approved by the board.

LONG-TERM INCENTIVE PLANS

2016 LTI awards

Each LTI award is based on individual performance, the level of the position, internal equity and overall market competitiveness. LTI awards granted to executives in early 2016 were benchmarked at the median of the comparator group and based on a percentage of base salary (see page 74 for details).

PSUs and options were granted to the named executives on March 1, 2016 as follows:

●

the LTI award is made up of 60% PSUs and 40% options

●

PSUs vest at the end of a three-year period based on our performance against the following criteria: our average realized uranium price relative to industry benchmarks (30%), tier-one production (30%) and our three-year average TSR (40%) relative to the TSX 60 index.

NAME

SECURITIES
UNDER
OPTIONS
GRANTED (#)

VALUE OF
OPTIONS ON
DATE OF
GRANT¹ ($)

EXERCISE

PRICE
($/SECURITY)

EXPIRY

DATE

PSU_S
GRANTED²

(#)

VALUE

OF PSU_S
GRANTED³

($)

DATE WHEN
PERFORMANCE
PERIOD MATURES

Tim Gitzel

404,300

1,455,480

16.38

02/29/2024

133,300

2,183,454

12/31/2018

Grant Isaac

152,800

550,080

16.38

02/29/2024

50,350

824,733

12/31/2018

Robert Steane

169,850

611,460

16.38

02/29/2024

56,000

917,280

12/31/2018

Alice Wong

98,800

355,680

16.38

02/29/2024

32,600

533,988

12/31/2018

Sean Quinn

95,550

343,980

16.38

02/29/2024

31,500

515,970

12/31/2018

Value of options

Options granted on March 1, 2016 expire on February 29, 2024 and are valued at approximately $3.60 per option using the Black-Scholes option-pricing model. The compensation consultant used the following key assumptions in the model when comparing companies.


Dividend yield (%)	Volatility (%)	Risk-free rate (%)	Expected life (years)	Exercise price ($)

2.2	29.9	0.9	5.5	16.38

In its analysis for the human resources and compensation committee, the compensation consultant estimated the expected value of Cameco’s options using the expected life of the option (average of a full term of eight years and a three-year vesting period). This approach is consistent with the majority of companies in our comparator group and is sensitive to the assumptions used. The figures may not be directly comparable across companies, but for compensation valuation purposes a consistent approach has been used. The exercise price of $16.38 per option is based on the closing price of Cameco shares on the TSX on the day immediately before the grant.

PSUs granted

The number of PSUs reflect 100% of the original number of PSUs awarded and has not been adjusted to reflect performance. The actual number of PSUs earned can vary from 0 to 200% of the original number granted based on corporate performance.

Value of PSUs granted

The values represent the number of PSUs granted to each named executive, multiplied by $16.38, the closing price of Cameco shares on the TSX on the day immediately before the grant.

The PSUs granted on March 1, 2016 are for the three-year performance period from January 1, 2016 to December 31, 2018.

2016 MANAGEMENT PROXY CIRCULAR 77

2015 Details

Summary compensation table

The table below shows the base salary, incentive-based awards, pension value and other compensation awarded to the named executives in 2015 and the previous two years.

NAME AND

PRINCIPAL POSITION

YEAR

SALARY¹

($)

SHARE-

BASED

AWARDS²

($)

OPTION

BASED

AWARDS³

($)

ANNUAL

INCENTIVE
PLANS⁴

($)

PENSION

VALUE⁵

($)

ALL OTHER

COMPENSATION⁶

($)

TOTAL
COMPENSATION

($)

Tim Gitzel

President and Chief

Executive Officer

2015

2014

2013

1,035,282

936,400

918,000

1,949,300

1,686,349

1,652,200

1,300,165

1,123,648

1,100,625

1,084,000

1,060,000

785,000

548,600

292,700

264,500

–

5,917,347

5,099,097

4,720,325

Grant Isaac

Senior Vice-President and

Chief Financial Officer

2015

2014

2013

530,177

468,200

459,000

584,790

1,481,984

550,000

389,364

374,308

366,875

366,000

333,000

248,000

206,200

134,900

136,200

–

2,076,531

2,791,392

1,760,075

Robert Steane

Senior Vice-President and

Chief Operating Officer

2015

2014

2013

616,843

572,200

561,000

1,493,608

857,290

842,600

595,014

571,960

560,585

444,000

472,000

350,000

221,500

118,400

(91,050

)

–

3,370,965

2,591,850

2,223,135

Alice Wong

Senior Vice-President and

Chief Corporate Officer

2015

2014

2013

448,616

416,200

408,000

389,860

1,191,436

367,400

259,576

249,780

244,779

235,000

246,000

182,000

219,500

95,000

(29,650

)

–

1,552,552

2,198,416

1,172,529

Sean Quinn

Senior Vice-President.

Chief Legal Officer and

Corporate Secretary

2015

2014

2013

431,200

378,538

314,150

374,420

141,369

141,460

249,522

94,243

94,155

225,000

209,000

107,995

420,300

1,558,400

(36,400

)

–

1,700,442

2,381,550

621,360

Ken Seitz

former Senior Vice-

President and Chief

Commercial Officer

2015

2014

2013

444,014

466,200

420,000

580,930

1,400,286

503,800

387,993

372,860

335,764

332,000

227,000

190,300

261,600

82,550

–

1,603,237

2,832,946

1,569,114

Base salary

Grant Isaac received a base salary increase on August 1, 2015.

Sean Quinn received a base salary increase in 2014 when he was promoted to this position. Each amount reflects actual pay for the year.

Share-based awards

These amounts reflect the grant date value of the actual number of PSUs originally awarded, using the closing price of Cameco shares on the TSX on the day before the grant. The number of PSUs that the named executives will actually earn can vary from 0 to 150% of the original number of PSUs granted, depending on performance (the board can pay up to 200% if performance is exceptional).

Robert Steane’s grant date value in 2015 includes a PSU value of $893,590 and RSU value of $600,018. Grant Isaac’s grant date value in 2014 includes a PSU value of $563,010 and RSU value of $917,974. Ken Seitz’s grant date value in 2014 includes a PSU value of $560,329 and RSU value of $839,957. Alice Wong’s grant date value in 2014 includes a PSU value of $375,340 and RSU value of $816,096. We awarded the following PSUs to the named executives from 2013 to 2015:


	March 2, 2015		March 3, 2014		March 1, 2013
Tim Gitzel		101,000		62,900		75,100
Grant Isaac		30,300		21,000		25,000
Robert Steane		46,300		32,000		38,300
Alice Wong		20,200		14,000		16,700
Sean Quinn		19,400		5,273		6,430
Ken Seitz		30,100		20,900		22,900
Grant price		$19.30		$26.81		$22.00

For purposes of financial statement disclosure, the PSUs were valued at $18.88 per unit for 2015, $27.25 per unit for 2014 and $21.45 per unit for 2013 using a Monte Carlo pricing model and the key assumptions set out in the table below. This model is considered the most appropriate way to value a plan with a relative market condition like total shareholder return. The total fair value of the PSUs is amortized into income over their three-year vesting period and the weighted average of the expected retirement dates of the named executives, whichever is lower. The non-market criteria relating to realized selling prices and production targets have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.


	Expected dividend ($)	Expected volatility (%)		Risk-free rate (%)		Expected life (years)		Expected forfeitures (%)
March 2015	–		29.2		0.5		3		4.6
March 2014	–		33.1		1.2		3		4.6
March 2013	–		33.5		1.1		3		2.0

78 CAMECO CORPORATION

The table below shows the difference between the grant date value for compensation purposes and the grant date fair value used for purposes of financial statement disclosure.


Grant date	Grant date value for compensation purposes ($)		Grant date fair value for financial statement disclosure ($)		Difference per unit ($)

March 2, 2015		19.30		18.88		0.42
March 3, 2014		26.81		27.25		(0.44	)
March 1, 2013		22.00		21.45		0.55

Grant Isaac and Alice Wong each received a retention incentive of restricted share units (RSUs) that do not vest until March 3, 2017 at a grant date value of $26.81, the closing price of Cameco shares on the TSX the day before the grant. Ken Seitz received a grant of RSUs on March 3, 2014 that were cancelled when he resigned.

Robert Steane received an incentive of RSUs on March 2, 2015 at a grant date value of $19.30, the closing price of Cameco shares on the TSX on the day before the grant. The units vested on March 2, 2016 and shares were purchased on the TSX at an average share price of $16.78 on March 3, 2016. Robert received Cameco shares instead of cash and he realized 87% of the original grant date value, which is aligned with the decrease in Cameco’s share price over this period.


RSUs awarded on March 3, 2014	# of units	Grant date value (per unit)	Vesting date

Grant Isaac	34,240	$26.81	March 3, 2017

Alice Wong	30,440	$26.81	March 3, 2017
RSUs awarded on March 2, 2015

Robert Steane	31,089	$19.30	March 2, 2016

For purposes of financial statement disclosure, the RSUs were valued at $18.89 per unit (awarded in March 2015) and $27.21 per unit (awarded in March 2014) using the closing price of Cameco shares on the TSX on the date of grant.

Option-based awards

These amounts reflect the grant date value of the actual number of options originally granted using the Black-Scholes option-pricing model and key assumptions determined by the compensation consultants and listed below.

The table below shows the number of options granted to the named executives over the last three years and the corresponding grant date valuations.


	March 2, 2015		March 3, 2014		March 1, 2013

Tim Gitzel		284,500		155,200		187,500
Grant Isaac		85,200		51,700		62,500
Robert Steane		130,200		79,000		95,500
Alice Wong		56,800		34,500		41,700
Sean Quinn		54,600		13,017		16,040
Ken Seitz		84,900		51,500		57,200

Grant date valuation (per option)		$4.57		$7.24		$5.87

The human resources and compensation committee reviewed estimates of the value of the options on the grant dates that were prepared by Mercer (March 2015, March 2014 and March 2013). It then recommended to the board the number of options to grant, which the board approved. The compensation consultants used the Black-Scholes option-pricing model and the following key assumptions:


	Dividend yield (%)		Volatility (%)		Risk-free rate (%)		Expected life (years)		Exercise price ($)

March 2015		1.80		29.2		1.5		5.5		19.30
March 2014		1.80		32.8		1.7		5.5		26.81
March 2013		1.90		33.7		1.3		5.5		22.00

As this approach may not be identical to that used by other companies and is sensitive to the assumptions used, the figures may not be directly comparable across companies, however a consistent approach has been used for compensation valuation purposes. The expected life assumption is based on Mercer’s calculation of the expected life of Cameco options and options issued by companies in the comparator group in effect at the time. They calculate the expected life by adding the actual term (eight years) to the vesting period (three years), and dividing in half.

For purposes of financial statement disclosure, options were valued at $4.30 (awarded in March 2015), $6.79 (awarded in March 2014) and $6.51 (awarded in March 2013) each on the date of the grant. We used the Black-Scholes option-pricing model all three years and the following key assumptions:


	Dividend yield (%)		Volatility (%)		Risk-free rate (%)		Expected life (years)		Exercise price ($)

March 2015		2.07		32.1		0.7		4.5		19.30
March 2014		1.49		32.9		1.5		4.4		26.81
March 2013		1.82		40.5		1.2		4.4		22.00

These accounting value assumptions are different from the compensation value assumptions in the calculations above. The human resources and compensation committee uses the compensation valuation method and assumptions used in valuing compensation of companies in the comparator group to allow for a better comparison with market comparators.

The accounting value assumptions are based on our own internal research and past experience of how employees exercise their options.

The difference per option granted between the two models is:

●

March 2015 – $(0.27)

●

March 2014 – $(0.45)

●

March 2013 – $0.64

For purposes of financial statement disclosure, the options were amortized over their three-year vesting period or the weighted average of the years to expected retirement of the named executives, whichever was lower.

Annual incentive plans

These amounts were earned in the fiscal year shown and were paid in the following fiscal year. Grant Isaac’s award was 25% higher than his original 2015 target to recognize his strong individual performance and the higher target for his expanded role and scope of responsibilities as of August 1, 2015 when Ken Seitz resigned.

2016 MANAGEMENT PROXY CIRCULAR 79

Pension value

The amounts for the named executives include company contributions under the registered defined contribution pension plan, plus the present value of the projected pension earned in each year for service credited under the supplemental executive pension program. The 2015 pension value for Ken Seitz was determined when he resigned in 2015.

All other compensation

This amount does not include perquisites and other personal benefits because they total less than $50,000 and less than 10% of the annual salary for any of the named executives. Perquisites and benefits are valued at the cost to Cameco and include commissions to buy shares with PSU payouts, premiums on incremental life insurance and long-term disability, a financial and tax planning allowance, an executive medical plan and a vehicle allowance.

VALUE OF OPTIONS EXERCISED (SUPPLEMENTAL TABLE)

The table below is additional information to show the options exercised (if any) by each named executive in each of the last three years and the dollar value realized.

NAME

YEAR

CAMECO COMMON SHARES
ACQUIRED ON EXERCISE OF
OPTIONS

(#)

CAMECO COMMON

SHARES HELD

FOLLOWING EXERCISE

(#)

CASH REALIZED (BEFORE TAXES)

ON CONCURRENT SALE OF

CAMECO COMMON SHARES

($)

Tim Gitzel

2015

–

2014

–

2013

–

Grant Isaac

2015

–

2014

–

2013

–

Robert Steane

2015

–

2014

–

2013

–

Alice Wong

2015

–

2014

–

2013

–

Sean Quinn

2015

–

2014

–

2013

–

Ken Seitz

2015

–

2014

–

2013

–

All options awarded to the named executives since 2008 have an exercise price greater than the current price of Cameco shares on the TSX. None of the executives have exercised options in 2013, 2014 or 2015.

80 CAMECO CORPORATION

Incentive plan awards

The table below shows the total unexercised option and share awards granted to the named executives as of December 31, 2015. Ken Seitz has no unexercised options or share-based awards. His stock options expired 90 days after his resignation date and the share-based awards were cancelled when he resigned.

OPTION-BASED AWARDS¹

SHARE-BASED AWARDS

NAME

GRANT

DATE

NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#)

OPTION
EXERCISE
PRICE ($)

OPTION
EXPIRY

DATE

VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS($)

NUMBER OF
SHARES OR
UNITS OF
SHARES THAT
HAVE NOT
VESTED (#)

MARKET OR

PAYOUT VALUE OF
SHARE-BASED
AWARDS THAT

HAVE NOT

VESTED² ($)

MARKET OR

PAYOUT VALUE OF
VESTED SHARE-
BASED AWARDS

NOT PAID OUT OR
DISTRIBUTED ($)

Tim Gitzel

03/04/2008

03/16/2009

03/01/2010

03/01/2011

07/01/2011

05/15/2012

03/01/2013

03/03/2014

03/02/2015

40,000

50,000

60,000

75,000

50,000

268,600

187,500

155,200

284,500

38.83

19.37

28.90

39.53

25.44

21.14

22.00

26.81

19.30

03/03/2016

03/15/2017

02/28/2018

02/28/2019

06/30/2019

05/14/2020

02/28/2021

03/02/2022

03/01/2023

–

62,900

101,000

–

1,527,893

Total

1,170,800

163,900

1,527,893

Grant Isaac

09/08/2009

03/01/2010

03/01/2011

05/15/2012

03/01/2013

03/03/2014

03/02/2015

3,334

13,334

25,000

89,500

62,500

51,700

85,200

29.10

28.90

39.53

21.14

22.00

26.81

19.30

09/07/2017

02/28/2018

02/28/2019

05/14/2020

02/28/2021

03/02/2022

03/01/2023

–

55,240

30,300

–

584,477

–

508,615

Total

330,568

85,540

584,477

508,615

Robert Steane

03/04/2008

03/16/2009

03/01/2010

03/01/2011

05/15/2012

03/01/2013

03/03/2014

03/02/2015

12,300

13,005

13,500

50,000

136,800

95,500

79,000

130,200

38.83

19.37

28.90

39.53

21.14

22.00

26.81

19.30

03/03/2016

03/15/2017

02/28/2018

02/28/2019

05/14/2020

02/28/2021

03/02/2022

03/01/2023

–

32,000

77,389

–

530,689

779,205

Total

530,305

109,389

530,689

779,205

Alice Wong

03/04/2008

03/16/2009

03/01/2010

03/01/2011

05/15/2012

03/01/2013

03/03/2014

03/02/2015

12,300

13,005

10,575

10,275

59,700

41,700

34,500

56,800

38.83

19.37

28.90

39.53

21.14

22.00

26.81

19.30

03/03/2016

03/15/2017

02/28/2018

02/28/2019

05/14/2020

02/28/2021

03/02/2022

03/01/2023

–

44,440

20,200

–

519,611

–

339,765

Total

238,855

64,640

519,611

339,765

Sean Quinn

03/04/2008

03/16/2009

03/01/2010

03/01/2011

05/15/2012

03/01/2013

03/03/2014

03/02/2015

12,300

8,600

12,900

12,500

16,040

13,017

54,600

38.83

19.37

28.90

39.53

21.14

22.00

26.81

19.30

03/03/2016

03/15/2017

02/28/2018

02/28/2019

05/14/2020

02/28/2021

03/02/2022

03/01/2023

–

5,273

19,400

–

130,820

Total

142,857

24,673

130,820

The number of options and exercise prices have been adjusted to reflect stock splits of Cameco shares.

2016 MANAGEMENT PROXY CIRCULAR 81

The PSU awards are subject to performance conditions and valued at the minimum possible payout of zero. The RSUs awarded to Grant Isaac and Alice Wong on March 3, 2014 and to Robert Steane on March 2, 2015 are not subject to performance conditions so they are valued at $17.07, the closing price of Cameco shares on the TSX on December 31, 2015.

The next table shows the:

●

total value of the named executive’s options when they vested during 2015

●

share-based awards that vested at the end of 2015 and were paid out in 2016

●

short-term incentive award earned in 2015 and paid in 2016.

NAME

OPTION-BASED AWARDS –
VALUE DURING THE
YEAR ON VESTING¹ ($)

SHARE-BASED AWARDS –
VALUE VESTED DURING

THE YEAR² ($)

NON-EQUITY INCENTIVE PLAN
COMPENSATION – VALUE EARNED
DURING THE YEAR³ ($)

Tim Gitzel

1,527,893

1,084,000

Grant Isaac

508,615

366,000

Robert Steane

779,205

444,000

Alice Wong

339,765

235,000

Sean Quinn

130,820

225,000

Ken Seitz

Option-based awards

The amounts reflect the pre-tax value that the executives would have realized if they had exercised their options that vested in 2015, on the date they vested. Options that had a positive value at the time of vesting are included in the calculation of these figures.

Share-based awards

The amounts are the values of the PSUs that were granted in 2013, vested at December 31, 2015 and paid out to the named executives on March 1, 2016 at $16.51 (the actual average purchase price of our common shares purchased on the TSX on behalf of the named executives on that date). The compensation value we previously disclosed for these PSUs was based on the target number of PSUs multiplied by the share value on grant date. The named executives realized 92.5% of the grant date value of the PSUs that were granted as part of their total compensation for 2013.

Non-equity incentive plan compensation

The amounts are the STI payments for 2015 that were paid in 2016.

82 CAMECO CORPORATION

Equity compensation plan information

SECURITIES AUTHORIZED FOR ISSUE UNDER EQUITY COMPENSATION PLANS

(authorized for issue from treasury under our compensation plans at the end of 2015)


PLAN CATEGORY	NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (A)		WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (B)		NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN A) (C)
Equity compensation plans approved by security holders		8,503,238		$26.04	6,670,881
Equity compensation plans not approved by security holders		–		–	–
Total		8,503,238		$26.04	6,670,881

Of the 8,503,238 options outstanding at December 31, 2015, 6,475,811 were exercisable and 2,027,427 were not.

The total number of Cameco shares that can be issued under the option plan and other compensation arrangements must be less than 43,017,198 (10.9% of our total and outstanding common shares as of March 8, 2016).

The table below gives details about the number of shares under our stock option plan at the end of 2015 and as of March 8, 2016. The burn rate is the number of options issued in 2015 (965,823), expressed as a percentage of the 395,792,522 Cameco shares that were issued and outstanding as at December 31, 2015.


		AS OF DECEMBER 31, 2015

Number of options available for issue under the option plan and other compensation arrangements		6,670,881

Number of options issued in 2015 under the option plan and other compensation arrangements		965,823

2015 Burn rate		0.24%


		AS OF MARCH 8, 2016

Number (%) of our shares issued and outstanding to be issued when outstanding options under the option plan are exercised		7,876,308 (2.0%)

Number (%) of our issued and outstanding shares still available for issue under the option plan		7,270,811 (1.8%)

Total dilution rate		3.8%

The table below shows other activity in the option plan since it was introduced in 1992:

Maximum initial share reserve (August 15, 1995)

31,460,418

Increase in the reserve (June 12, 2006)

11,556,780

Total shares issued under the plan (as at business open on March 8, 2016)

27,870,079

Total shares issued under the plan / total shares issued and outstanding

(as at business open on March 8, 2016)

7.0%

Total shares issued and outstanding (as at business open on March 8, 2016)

395,792,522

2016 MANAGEMENT PROXY CIRCULAR 83

Pension benefits

DEFINED CONTRIBUTION PLAN

All regular, full-time and part-time employees (including all of the named executives) participate in our registered defined contribution plan as of December 31, 2015.

Under the Income Tax Act (Canada), the plan had a contribution limit of $25,370 in 2015, based on a salary of approximately $211,417.

SUPPLEMENTAL EXECUTIVE PENSION PROGRAM

The supplemental executive pension program is aimed at attracting and retaining talented executives. It provides a lump sum retirement benefit that is consistent with the executive’s salary and offsets the strict limits of registered pension plans under the Income Tax Act (Canada).

All Canadian-based executives participate in the program. It had 17 active members as at December 31, 2015, with two inactive members, 18 retirees and spouses of deceased retirees who were receiving a pension and one former member with a deferred entitlement. This includes certain officers of wholly-owned subsidiaries who were previously eligible to participate in the program.

The supplemental benefit is calculated as follows:

LOGO

The supplemental benefit is based on actual years of service from the participant’s date of hire with Cameco up to the date of termination, or until the end of the notice period for termination without cause. It is calculated on base salary, and unlike other companies, does not include bonuses as part of the pensionable earnings. The supplemental program does not allow past service credits or any kind of accelerated service. Full benefits are paid at the normal retirement age of 65, but are also payable starting at 60 years of age if the person has 20 years of service.

Except for benefits for participants who are US taxpayers, the program is funded in part by trust assets and the remainder by a letter of credit held by the program’s trustees. The liability is approximately $37,920,250 ($17,008,052 for the named executives) as of December 31, 2015. The face amount of the letter of credit will be determined each year based on the wind-up liabilities of the supplemental program (excluding benefits for US taxpayers), less any trust assets. The face amount of the letter of credit for 2015 was $27,900,000. The trustee would be able to draw on the letter of credit to pay benefits to members following specified trigger events. Benefits will continue to be paid from the trust assets until the fund is exhausted, at which time Cameco will begin paying benefits from corporate assets.

EARLY RETIREMENT

Under our registered defined contribution plan, members can transfer their account balance or begin receiving a benefit any time after termination, so early retirement does not apply. All named executives are members of this plan.

Under our supplemental program, Robert Steane is eligible to retire with unreduced benefits. The other named executives can take early retirement starting at age 55, however, the benefit formula will be reduced by 0.25% for each month before the defined age (at least age 60 with at least 20 years of continuous employment, or age 65, whichever is earlier).

84 CAMECO CORPORATION

EXECUTIVE PENSION VALUE DISCLOSURE

The table below shows the estimated annual pension service costs for the supplemental program and Cameco’s contribution to the defined contribution plan as the compensatory change. It also shows the accrued pension obligations and annual pension payable under our pension plans for each named executive.


	NUMBER OF		ANNUAL BENEFITS		PENSION
	YEARS OF		PAYABLE¹		OBLIGATION AT				NON-	PENSION
NAME	CREDITED SERVICE (#)		AT YEAR END	AT AGE 65	START OF YEAR² ($)		COMPENSATORY CHANGE^2,3 ($)		COMPENSATORY CHANGE⁴ ($)	OBLIGATION AT YEAR END⁵ ($)
Tim Gitzel		8.98	256,300	578,800		3,264,500		548,600	67,700	3,880,800
Grant Isaac		6.47	91,400	388,400		1,085,300		206,200	15,300	1,306,800
Robert Steane		32.80	464,600	464,600		6,185,300		221,500	15,600	6,422,400
Alice Wong		28.92	308,600	424,300		4,769,100		219,500	115,800	5,104,400
Sean Quinn		22.25	227,800	330,900		3,499,700		420,300	84,100	4,004,100
Ken Seitz		11.89	160,400	403,600		2,195,000		190,300	(2,385,300)	0

Annual benefits payable

The annual benefits payable for all named executives include benefits under the registered defined contribution pension plan and the supplemental executive pension program. The defined contribution costs are also included in the service cost as described under Compensatory change. The annual benefits payable do not take into account any early retirement reductions or vesting requirements.

The amounts under at age 65 are based on current compensation levels and assume accrued years of service to age 65 for each of the named executives. Under our supplemental executive pension program, the named executives are eligible to retire at age 55, which would reduce the pension benefits they are entitled to receive.

Annual benefits payable at year end and at age 65 are based on final average earnings as at December 31, 2015.

Pension obligation at start of year is based on December 31, 2014 accounting assumptions.

Pension obligation at start of year and the compensatory change are estimated totals that include our registered defined contribution pension plan and supplemental executive pension program. They are based on assumptions representing entitlements in employment agreements that may change over time. The methods we used to determine these estimates may not be exactly the same as methods other companies use, so the figures may not be directly comparable.

We used the following key assumptions to estimate these benefit obligations:

●

100% vesting

●

a retirement age of 63 or one year after the valuation date if 63 years of age or older. The assumed retirement age of 63 is management’s best estimate for determining the accrued benefit obligation as at December 31, 2014, as reported in our financial statements

●

salary increases of 3.0% each year

●

a discount rate of 3.9% each year to determine the benefit obligation

●

a long-term rate of return on defined contribution plan assets of 6.0%

●

benefits are pre-tax.

See note 26 to our audited 2015 financial statements (in our 2015 annual report and also on our website) for more information about our pension plans.

Compensatory change is the value of the projected pension earned from January 1, 2015 to December 31, 2015 for our registered defined contribution pension plan and supplemental executive pension program.

Non-compensatory change includes changes such as changes in assumptions (other than those used to estimate the compensatory change), employee contributions and interest on the accrued obligation at the start of the year. The amount for Ken Seitz is the pension payout he received when he resigned.

Pension obligation at year end is the value of the named executive’s projected pension earned for service up to December 31, 2015 under our registered defined contribution pension plan and supplemental executive pension program. It is based on December 31, 2015 accounting assumptions and includes RRSP balances included in the base plan, if any.

We used the following key assumptions to estimate these benefit obligations:

●

100% vesting

●

salary increases of 3.0% each year

●

a discount rate of 4.0% each year to determine the benefit obligation

●

a long-term rate of return on defined contribution plan assets of 6.0%

●

benefits are pre-tax.

The pension amounts for all of the named executives equal the value of their accumulated contributions under the registered defined contribution pension plan, supplemented by amounts based on final average earnings and service under the supplemental executive pension program (a defined benefit plan).

2016 MANAGEMENT PROXY CIRCULAR 85

Loans to executives

As of March 8, 2016, we and our subsidiaries had no loans outstanding to our current or former named executives, except routine indebtedness as defined under Canadian securities laws.

Termination and change of control benefits

We have employment agreements with the named executives. They are for an indefinite period and provide for:

●

a base salary

●

participation in the short-term incentive plan

●

participation in the long-term incentive plans (including PSUs and options)

●

participation in the employee defined contribution pension plan and the supplemental executive pension program.

The agreements also include post-termination obligations requiring that the named executives do not:

●

use or disclose specialized knowledge, contracts and connections obtained while at Cameco

●

compete against us in any way for 12 months after leaving the organization

●

solicit any of our customers, suppliers or employees or harm our relationships with any of them for 12 months (18 months for the CEO) after leaving the organization.

The summary on page 89 shows the incremental compensation that would be paid to the named executives if their employment had been terminated on December 31, 2015. If Robert Steane had resigned, it would have been treated as retirement because he is eligible to retire. None of the named executives receive any incremental benefits if there is a change of control but no termination of employment.

CEO

Tim Gitzel’s employment agreement provides for:

●

a retention incentive of 50,000 stock options granted on July 1, 2011, which vested over three years in 2012, 2013, and 2014, and 70,000 RSUs, also granted on July 1, 2011, which vested on July 1, 2014 and paid out (less withholding taxes) in Cameco shares purchased on the market on July 2, 2014

●

a requirement to hold four times his base salary in Cameco shares and qualifying PSUs by December 31, 2016

●

a severance period of two years if he is terminated without cause

●

a $7,000 annual allowance for tax advice ($14,000 in his retirement year)

●

a requirement to give a minimum notice of six months for resignation or retirement

●

accelerated vesting of certain equity awards if the CEO’s employment is terminated within 24 months following a change of control (see the summary on page 87 for details on compensation upon termination).

OTHER NAMED EXECUTIVES

The employment agreements for the other named executives provide for:

●

a requirement to hold two times their base salary in Cameco shares and qualifying PSUs by December 31 of the fifth year in their current positions

●

a notice period of 18 months if they are terminated without cause

●

a $5,000 annual allowance for tax advice ($10,000 in their retirement year)

●

a requirement to give a minimum notice of three months for resignation or retirement

●

accelerated vesting of certain equity awards if employment is terminated within 24 months following a change of control (see the summary on page 87 for details on compensation upon termination).

86 CAMECO CORPORATION

The table below is a summary of the compensation that would be paid to the named executives if the employment of any of them is terminated. We believe the following terms are fair, competitive with the market and based on industry practice.

TYPE OF
TERMINATION

SEVERANCE

STI BONUS

OPTIONS

PSUs

RSUs

BENEFITS

PENSION

Retirement¹

● none

● none, unless the executive retires on or near the last day of the year

● three years to vest

● must be exercised within three years or the original term, whichever is earlier

● performance is measured to the end of the year of retirement

● awards are pro-rated to completed months of service

● all outstanding RSUs are cancelled

● post-retirement benefits continue until age 65

● once the executive turns 65, life insurance, health and dental benefits are reduced and are provided until death

● credited service no longer earned

Resignation²

● executive must give three months’ notice, except for CEO who must give six months’ notice

● if we waive the notice, we must pay his base salary for the three or six months

● none

● vesting continues for 90 days

● must be exercised within 90 days or the original term, whichever is earlier

● all outstanding PSUs are cancelled

● all outstanding RSUs are cancelled

● none

● credited service no longer earned

Termination without cause³

● lump sum equal to base salary and target bonus for the notice period

● none, unless committee exercises discretion, usually when executive has worked most of the year

● options continue to vest for the notice period

● must be exercised within the notice period or by the original expiry date, whichever is earlier

● performance is measured to the end of the year of termination

● awards are pro-rated to completed months of service

● a pro-rated number of awards vest and are valued at the volume-weighted average price of the 20 trading days prior to the termination date

● employer contributions for health, dental and life insurance benefits continue for the notice period or until executive obtains other employment, whichever is earlier

● coverage continues and credited service continues to be earned for the notice period

Termination without cause or for good reason within 24 months of a change of control⁴

● same as for termination without cause

● all options vest immediately and may be exercised until the original term or 24 months, whichever is earlier

● all PSUs vest and are paid at target within 30 days

● all RSUs vest immediately and are payable in cash within 30 days

● same as for termination without cause

2016 MANAGEMENT PROXY CIRCULAR 87

TYPE OF
TERMINATION

SEVERANCE

STI BONUS

OPTIONS

PSUs

RSUs

BENEFITS

PENSION

Termination with cause

● none

● all entitlement to the bonus is lost

● vesting continues for 30 days or the original term, whichever is earlier

● all outstanding PSUs are cancelled

● all outstanding RSUs are cancelled

● none

● credited service no longer earned

● must be exercised within 30 days

Death

● none

● pro-rated to date of death

● three years to vest

● must be exercised within three years or original term, whichever is earlier

● performance is measured to end of year of death

● awards are pro-rated to the completed months of service as of date of death

● awards are pro-rated to date of death and valued at the volume-weighted average price of the 20 trading days prior to date of death

● life insurance is paid on death

● credited service no longer earned

● value of vested pension benefit is paid to the beneficiary

Retirement

At the discretion of the CEO and provided that the executive is at least 57 years old with at least 10 years of services when he or she retires, the executive may be eligible for post-retirement benefits including health, dental, accidental death and dismemberment, and life insurance. Also at the discretion of the CEO, a supplemental amount of $1,000 per month is paid until age 65, if the executive retires and is at least 57 years old with 10 years of service.

Resignation

Robert Steane is eligible for retirement and therefore the compensation that is paid if a senior executive resigns does not apply.

Termination without cause

The notice period for Tim Gitzel is two years or the period remaining until age 65, whichever is earlier. The notice period for the other named executives is 18 months or the period remaining until age 65, whichever is earlier.

Termination without cause or good reason within 24 months of a change of control

According to the ENL Reorganization Act, no person, alone or together with associates may hold, beneficially own or control, directly or indirectly, more than 25% of Cameco’s voting shares that can be cast to elect the directors. Because of the legislated restrictions on share ownership, there would have to be an act of federal parliament for anyone to hold more than 25% of our voting shares. For Tim Gitzel, change of control is defined as an entity holding 35% or more of our voting shares, transfer or lease of substantially all of the company’s assets, dissolution or liquidation of the company, or the board deciding that a change of control has occurred. For the other named executives, change of control is the same except that an entity must hold 50% or more of our voting shares.

88 CAMECO CORPORATION

The table below shows the incremental values that would be paid to the named executives if any of them had been terminated on December 31, 2015 or terminated without cause following a change of control. Cameco has legislated ownership restrictions under the ENL Reorganization Act. While a change of control is possible, it would require an act of parliament or one of the activities discussed in note 4 of the previous table. Ken Seitz was not actively employed at December 31, 2015 and no incremental values would have been be paid.


TYPE OF TERMINATION	SEVERANCE ($)		STI BONUS¹ ($)		OPTIONS² ($)		PSUs AND RSUs³ ($)		BENEFITS⁴ ($)		PENSION⁵ ($)		TOTAL PAYOUT ($)

Tim Gitzel

Resignation⁶		–		(1,084,000)		–		(2,679,765)		–		–	(3,763,765)

Termination without cause		4,000,000		–		–		–		30,600		793,800	4,824,400

Termination without cause with a change of control		4,000,000		–		–		2,679,765		30,600		793,800	7,504,165

Termination with cause		–		(1,084,000)		–		(2,679,765)		–		–	(3,763,765)

Death		–		–		–		–		–		(323,700)	(323,700)

Grant Isaac

Resignation⁶		–		(366,000)		–		(1,398,579)		–		–	(1,764,569)

Termination without cause		1,443,750		–		–		559,824		21,000		251,500	2,276,074

Termination without cause with a change of control		1,443,750		–		–		1,398,579		21,000		251,500	3,144,829

Termination with cause		–		(366,000)		–		(1,398,579)		–		–	(1,764,579)

Death		–		–		–		342,052		468,900		386,100	1,197,052

Robert Steane

Retirement⁷		–		–		–		–		8,000		–	8,000

Termination without cause		1,517,505		–		–		508,305		11,500		224,000	2,261,310

Termination without cause with a change of control		1,517,505		–		–		1,788,510		11,500		224,000	3,541,515

Termination with cause		–		(444,000)		–		(1,788,510)		–		–	(2,232,510)

Death		–		–		–		423,418		–		(6,175,800)	(5,752,382)

Alice Wong

Resignation⁶		–		(235,000)		–		(746,794)		–		–	(981,794)

Termination without cause		973,800		–		–		497,694		20,400		217,700	1,709,594

Termination without cause with a change of control		973,800		–		–		1,056,864		20,400		217,700	2,268,764

Termination with cause		–		(235,000)		–		(1,056,864)		–		–	(1,291,864)

Death		–		–		–		304,091		432,800		(1,631,200)	(894,309)

Sean Quinn

Resignation⁶		–		(225,000)		–		(403,404)		–		–	(628,404)

Termination without cause		936,000		–		–		–		20,200		220,000	1,176,200

Termination without cause with a change of control		936,000		–		–		403,404		20,200		220,000	1,579,604

Termination with cause		–		(225,000)		–		(403,404)		–		–	(628,404)

Death		–		–		–		–		416,000		(1,164,700)	(748,700)

STI bonus

If the executive resigns or is terminated for cause, he or she forfeits any outstanding STI bonus payment. We calculated the payment being forfeited based on the STI bonus determined in 2016 for 2015 performance.

Options

The named executives only receive an incremental benefit on their options when there is a termination without cause with a change of control. Currently under the ENL Reorganization Act, a change of control for Cameco is not permitted. The amount shown is the in-the-money value at December 31, 2015 of the unvested options which would vest upon a termination without cause with a change of control at December 31, 2015. There is no incremental benefit as none of the options are in-the-money.

PSUs and RSUs

If there is a retirement, termination without cause or death, the named executives may receive an incremental benefit for any outstanding PSUs, to account for the fact that our corporate performance may be better at the end of the year of termination, than it turns out to be at the end of the original three-year vesting period. In the table, we have assumed that the performance multiplier at the end of the assumed year of termination and at the end of the original three-year vesting period are the same so there is no incremental benefit at retirement, termination without cause or death.

2016 MANAGEMENT PROXY CIRCULAR 89

If the executive resigns or is terminated for cause, he or she forfeits any PSU payment. When Ken Seitz resigned in 2015 he forfeited any PSU payment. To determine the amount forfeited, we calculated the payout of the outstanding PSUs based on a 100% performance multiplier and the volume-weighted average price of a Cameco common share on the TSX over the last 20 trading days of 2015 of $16.35.

If the executive is terminated without cause with a change of control, all outstanding PSUs vest immediately at target and are paid out in the first quarter of 2016. The calculation of the PSUs in this situation is based on a share price of $16.35, the volume-weighted average price of a Cameco common share on the TSX over the last 20 trading days of 2015, as required under the PSU plan.

Grant Isaac, Robert Steane and Alice Wong have RSUs. If any of them resign or are terminated for cause, they forfeit any RSU payment. When Ken Seitz resigned in 2015 he forfeited any RSU payment. To determine the amount forfeited, we calculated the payout of the outstanding RSUs in accordance with the RSU plan based on a share price of $16.35, the volume-weighted average price of a Cameco common share on the TSX for the 20 trading days up to December 31, 2015. If they are terminated without cause with a change of control, all outstanding RSUs vest immediately, and are paid out within 30 days of December 31, 2015. The calculation of the RSUs in this situation is based on the volume-weighted average price of a Cameco common share on the TSX for the 20 trading days up to December 31, 2015, as required under the RSU plan. If either of them die, the outstanding RSUs are paid out pro-rated to the date of death. The calculation of the RSUs for Grant Isaac and Alice Wong is based on the volume-weighted average price of a Cameco common share on the TSX for the 20 trading days up to December 31, 2015, as required under the RSU plan, prorated for service for 22 months of the three-year term, which is the time period from the grant date (March 2014) to December 31, 2015; and it is calculated on the same basis for Robert Steane except that his RSUs are prorated for service for 10 months of the one-year term, which is the time period from his grant date (March 2015) to December 31, 2015.

Benefits

Determined using a discount rate of 4.0% at December 31, 2015. At the discretion of the CEO, the executive may be eligible for post-retirement benefits including health, dental, accidental death and dismemberment, and life insurance provided that the executive is at least 57 years old with at least 10 years of service when he or she retires. Tim Gitzel, Grant Isaac, Alice Wong and Sean Quinn are not eligible for post-retirement benefits because they had not reached the age of 57 on December 31, 2015. Ken Seitz was not eligible for post-retirement benefits at his date of resignation.

Pension

The incremental pension benefit on termination without cause, with or without a change of control, is equal to the value of benefits to be credited according to the notice period for each executive and calculated using the December 31, 2015 accounting assumptions (same as the key assumptions set out in note 2 on page 85). The incremental pension benefit on death is the difference between the commuted value on resignation or retirement, if eligible, and the commuted value on death at December 31, 2015. If the commuted value on death is less than the commuted value on resignation (or retirement, in the case of Robert Steane), the pension benefit is negative.

The table below shows the commuted values for resignation (retirement in the case of Robert Steane). We estimated these values using the Canadian Institute of Actuaries’ Standard Practice for Determining Pension Commuted Values, and assumed:

●

100% vesting

●

the executive’s age or age 55, whichever is later

●

no salary increase after December 31, 2015

●

a discount rate of 2.50% each of the next 10 years and 3.80% each year thereafter for Canadian and US liabilities

●

benefits are pre-tax.


Commuted value	For retirement	On December 31, 2015

The commuted values are based on assumptions representing entitlements in the employment agreements, and these may change over time. The methods we use may not be exactly the same as those used by other companies, so you may not be able to compare our figures directly with those of other companies.	Robert Steane	$7,699,700
	For resignation
	Tim Gitzel	$3,956,600
	Grant Isaac	$1,057,100
	Alice Wong	$6,061,900
	Sean Quinn	$4,489,600
	Ken Seitz	$0

Resignation

Based on their terms of employment in effect on December 31, 2015, if Tim Gitzel, Grant Isaac, Alice Wong or Sean Quinn had voluntarily ended their employment on December 31, 2015, it would have been regarded as a resignation because of their age. They would not receive a severance and would have been required to give six months’ notice (CEO) or three months’ notice prior to resignation. We can waive this notice if we pay six/three months’ base salary. The table assumes that we did not waive the notice period. The total commuted value of the supplemental executive pension program for Ken Seitz was $2,037,800, which was paid out in 2015.

Retirement

The termination on resignation estimate does not apply to Robert Steane because he is eligible to retire, and his resignation would be treated as a retirement.

90 CAMECO CORPORATION

Other information

Shareholder proposals

Shareholders who meet eligibility requirements under the CBCA can submit a shareholder proposal as an item of business for our annual shareholder meeting in 2017.

Proposals must be submitted to our corporate secretary by January 9, 2017 for next year’s annual meeting. Only shareholder proposals that comply with the CBCA requirements received by that date, and our responses, will be printed in the management proxy circular we send to shareholders next spring.

Advance notice for director nominations

Our bylaws require advance notice for nominating directors at an annual meeting so there is a transparent, structured and fair process in the event of a potential proxy contest for the election of directors. The notice must include the name, address, age, citizenship and certain other information about the nominees. See section 6.2(d) of our bylaws on our website (cameco.com/about/governance/governance-guidelines).

You must send your nomination to our corporate secretary 30 to 65 days before the date of our annual shareholder meeting and it must comply with the bylaw requirements to be eligible for presentation at the meeting.

Information available online

A number of our documents are available on our website (cameco.com), SEDAR (sedar.com) and EDGAR (sec.gov/edgar.shtml), including:

●

2015 annual report, which includes financial information about us, as provided in the audited financial statements and MD&A for our most recently completed financial year

●

our most recent annual information form, which has additional information about our audit and finance committee, the audit and finance committee mandate in Appendix A, and other information required by Canadian securities regulators

●

our code of conduct and ethics, articles of incorporation and the bylaws, and the board committee mandates

●

our voting results following the annual meeting of shareholders.

Filings with the US Securities and Exchange Commission (SEC) can be accessed under Company filings on the SEC website (sec.gov).

Documents available in print

You can request a printed copy of the following documents at no charge:

●

our 2015 annual report which includes the audited financial statements and MD&A for the most recently completed financial year

●

any subsequent quarterly reports

●

our most recent annual information form

●

our code of conduct and ethics.

Send a note to the corporate secretary at Cameco, at 2121 – 11th Street West, Saskatoon, SK S7M 1J3.

2016 MANAGEMENT PROXY CIRCULAR 91

Appendix A

Interpretation

For the purposes of this circular:

a person is an “associate” of another person if:


i.		one is a corporation of which the other is an officer or director;

ii.		one is a corporation that is controlled by the other or by a group of persons of which the other is a member;

iii.		one is a partnership of which the other is a partner;

iv.		one is a trust of which the other is a trustee;

v.		both are corporations controlled by the same person;

vi.		both are members of a voting trust or parties to an arrangement that relates to voting securities of the Corporation; or

vii.		both are at the same time associates, within the meaning of any of (i) to (vi) above, of the same person;

provided that:



viii.		if a resident associated with a non-resident submits to the board of directors of the corporation a statutory declaration stating that no voting shares of the corporation are held, directly or indirectly, for a non-resident, that resident and non-resident are not associates of each other, provided the statutory declaration is not false;

ix.		two corporations are not associates pursuant to (vii) above by reason only that each is an associate of the same person pursuant to (i) above;

x.		if any person appears to the board to hold voting shares to which are attached not more than the lesser of four one-hundredths of 1% of the votes that may be cast to elect directors of the corporation and 10,000 such votes, that person is not an associate of any other person and no other person is an associate of that person in relation to those voting shares.

“beneficial ownership” includes ownership through a trustee, legal representative, agent or other intermediary.

“control” means control in any manner that results in control in fact, whether directly through ownership of securities or indirectly through a trust, an agreement, the ownership of any body corporate or otherwise.

“non-resident” means:



i.		an individual, other than a Canadian citizen, who is not ordinarily resident in Canada;

ii.		a corporation incorporated, formed or otherwise organized outside Canada;

iii.		a foreign government or agency thereof;

iv.		a corporation that is controlled by non-residents, directly or indirectly, as defined in any of (i) to (iii) above;

v.		a trust:

		a. established by a non-resident as defined in any of (ii) to (iv) above, other than a trust for the administration of a pension fund for the benefit of individuals, a majority of whom are residents; or

		b. in which non-residents as defined in any of (i) to (iv) above have more than 50% of the beneficial interest; or

vi.		a corporation that is controlled by a trust described in (v) above.

“person” includes an individual, corporation, government or agency thereof, trustee, executor, administrator, or other legal representative.

“resident” means an individual, corporation, government or agency thereof or trust that is not a non-resident.

The foregoing definitions are summaries only and are defined in their entirety by the provisions of the Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) and the articles of the corporation.

92 CAMECO CORPORATION

Appendix B

Board mandate

PURPOSE

The purpose of the board of directors (“board”) is to supervise the management of the business and affairs of the corporation. The board of directors will discharge this responsibility by developing and determining policy by which the business and affairs of the corporation are to be managed and by overseeing the management of the corporation.

COMPOSITION

The board is elected by the shareholders at the annual meeting of the shareholders of the corporation. The board shall appoint the chair annually from among its non-executive independent members. As fixed by the articles of the corporation, the board shall consist of at least three and not more than fifteen members. A majority of the directors shall be resident Canadians.

A majority of the directors shall be independent pursuant to standards for independence adopted by the board. The standards for independence are available on our website.

MEETINGS

The board will schedule at least six regular meetings annually and as many additional meetings as necessary to carry out its duties effectively. The board will hold special meetings at least once a year to specifically discuss strategic planning and strategic issues.

A meeting of the board may be called by the chair, the chief executive officer or any two directors. The corporate secretary shall, upon the direction of any of the foregoing, arrange a meeting of the board. Notice of the time and place of each meeting of the board must be given to each director either by personal delivery, electronic mail, facsimile or other electronic means not less than 48 hours before the time of the meeting or by mail not less than 96 hours before the date of the meeting. Board meetings may be held at any time without notice if all of the directors have waived or are deemed to have waived notice of the meeting.

A majority of the members of the board shall constitute a quorum. No business may be transacted by the board except at a meeting of its members at which a quorum of the board is present. Each director is expected to attend all meetings of the board. A director who is unable to attend a board meeting in person may participate by telephone or teleconference.

At board meetings, each director is entitled to one vote and questions are decided by a majority of votes of the directors present. In case of an equality of votes, the chair of the meeting does not have a second or casting vote.

The corporate secretary acts as secretary to the board. In the absence of the corporate secretary, the board may appoint any other person to act as secretary.

The board may invite such officers and employees of the corporation as it may see fit from time to time to attend at meetings of the board and assist thereat in the discussion and consideration of any matter.

DUTIES AND RESPONSIBILITIES

The board of directors has specific responsibilities for the following, which do not, in any way, limit or comprehensively define its overall responsibility for the stewardship of the corporation:

selection, appointment, evaluation and if necessary the termination of the chief executive officer;

satisfying itself as to the integrity of the senior executives of the corporation and as to the culture of integrity throughout the corporation;

succession planning, including appointing, counselling and monitoring the performance of executive officers;

oversight of the human resources policies of the corporation and while taking into account the views and recommendations of the human resources and compensation committee, approval of the compensation of the chief executive officer and the other executive officers;

adoption of an annual strategic planning process, approval of annual strategic plans and monitoring corporate performance against those plans;

approval of periodic capital and operating plans and monitoring corporate performance against those plans;

oversight of the policies and processes to manage risks of the corporation, and oversight of management’s mitigation of the material risks;

policies to require ethical behaviour of the corporation and its directors and employees, and compliance with laws and regulations;

oversight of the policies and processes for the implementation and integrity of the corporation’s internal control and management information systems and its financial reporting;

assessment of the effectiveness of the board and its committees and overseeing the establishment of an appropriate orientation program for new directors and an education program for all directors;

2016 MANAGEMENT PROXY CIRCULAR 93

definition of the duties and the limits of authority of senior management, including approving a position statement for the chief executive officer;

policies for disclosure of corporate information to facilitate effective communications with shareholders, other stakeholders and the public;

health and safety and environmental policies and oversight of systems to enable compliance with these policies and all relevant laws and regulations;

oversight of the policies and processes for estimating and disclosing the corporation’s mineral reserves;

corporate governance including the relationship of the board of directors to management and shareholders and taking reasonable steps to ensure the corporation has appropriate structures and procedures in place to permit the board of directors to effectively discharge its duties and responsibilities;

calling meetings of shareholders and submission to the shareholders of any question or matter requiring approval of the shareholders;

approval of directors for nomination and election, and recommendation of the auditors to be appointed at shareholders’ meetings, and filling a vacancy among the directors or in the office of the auditor;

issuance of securities of the corporation;

declaration of dividends and establishment of the dividend policy for the corporation;

approval of the annual audited financial statements and related management discussion and analysis, and the interim unaudited financial statements and related interim management discussion and analysis, management proxy circulars, takeover bid circulars, directors’ circulars, prospectuses, annual information forms and other disclosure documents required to be approved by the directors of a corporation under securities laws, regulations or rules of any applicable stock exchange;

adoption, amendment or repeal of bylaws of the corporation;

review and approval of material transactions not in the ordinary course of business; and

other corporate decisions required to be made by the board of directors, or as may be reserved by the board of directors, to be made by itself, from time to time and not otherwise delegated to a committee of the board of directors or to the management of the corporation.

Subject to the provisions of applicable law and the bylaws of the corporation, the responsibilities of the board of directors may be delegated, from time to time, to committees of the board of directors on such terms as the board of directors may consider appropriate.

ORGANIZATIONAL MATTERS

The procedures governing the board shall be those in Parts 6 and 7 of the General Bylaws of the corporation.

The board shall annually review and assess the adequacy of its mandate.

The board shall participate in an annual performance evaluation.

94 CAMECO CORPORATION

Appendix C

Stock option plan

The following kinds of changes must be approved by shareholders according to the terms of our stock plan:

General

●

any change to the number of common shares that can be issued under the plan, including increasing the fixed maximum number of common shares, or changing from a fixed maximum number to a fixed maximum percentage of common shares

●

any change to extend the period after a trading blackout when options can be exercised

●

any change to extend the expiry date of an option unless it would otherwise expire during a trading blackout period

●

any change that requires shareholder approval under applicable law such as those described in the rules, regulations and policies of any stock exchange that we are listed on.

Exercise price

●

any change that would cause the exercise price of an option to be lower than the fair market value of the common shares at the time the option is granted. This does not include standard adjustment provisions relating to dividends or stock splits, recapitalizations, consolidations or other fundamental corporate changes, or provisions for the treatment of options if there is a change of control or other similar transaction that affects the powers of the board to make certain changes to the option plan

●

any other change that would cause the exercise or purchase price of an option to be lower (other than the standard adjustment provisions or if there is a change of control or other similar transaction as described in the item above). Cancelling an option and reissuing it at a lower price is considered a reduction in the exercise price.

Eligibility

●

any change that increases the number of categories of people who are eligible to receive options, if it could increase the participation of insiders

●

any change allowing options to be transferred other than by will or intestate succession.

Securities

●

adding deferred or restricted share units or other share awards that would not involve an actual cash payment

●

any change that allows adding a cashless exercise feature, unless it reduces the number of underlying shares in the option plan reserve.

2016 MANAGEMENT PROXY CIRCULAR 95

LOGO

cameco.com

EX-99.3

Exhibit 99.3

Cameco Corporation

Use this proxy form to vote by proxy at our 2016 annual meeting of shareholders



	This proxy is solicited by management. Throughout this document, we, us, our and Cameco mean Cameco Corporation and you and your mean the person completing this form.	When Wednesday, May 11, 2016 8:30 a.m. CST Where Cameco Corporation 2121 - 11th Street West Saskatoon, Saskatchewan

1	Declare your residency
1	If you do not provide this information, we will consider the shares represented by this proxy to be owned and controlled by a non-resident, which means the vote may have less impact.

	You declare that the shares represented by this proxy are held, beneficially owned or controlled, either directly or indirectly, by a resident of Canada as defined below. If the shares are held in the names of two or more people, you declare that all of these people are residents of Canada.	¨ Yes ¨ No When you sign this form, you are certifying that you have done whatever is reasonably possible to confirm residential status.

What do we mean by residency?

Cameco shares have restrictions on ownership and voting for residents and non-residents of Canada. You can read about residency and voting starting on page 7 of the accompanying management proxy circular.

The definitions here are summaries only. The complete definitions are in the Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) and in our articles.


A non-resident is:		•	a trust
•	an individual, other than a Canadian citizen, who is not ordinarily resident in Canada		• that was established by a non-resident, other than a trust for the administration of a pension fund for individuals where the majority of the individuals are residents, or • where non-residents have more than 50% of the beneficial interest
•	a corporation
	• that was incorporated, formed or otherwise organized outside Canada, or • that is controlled by non-residents, either directly or indirectly


		•	a foreign government or foreign government agency
Anyone not included in the above description of non-resident is considered a resident. Residents can be individuals, corporations, trusts and governments or government agencies.



Two ways to vote: in person or by proxy
Our annual meeting gives you the opportunity to vote on several items of Cameco business. It is also an opportunity to get an update on our business, meet face to face with management and interact with the board of directors.
Your vote is important, regardless of the number of shares you hold.

	Vote in person Come to our annual meeting and vote your shares in person. Do not complete this form.

	Vote by proxy This is the easiest way to vote. It means you give someone else — called your proxyholder — the authority to attend the meeting and vote for you.

	You can vote by proxy in four ways:
	• On the internet — Go to www.cstvotemyproxy.com and follow the instructions on screen. You will need your control number, which appears below your name and address on this form. • By fax — Complete, date and sign this form and fax both pages to our transfer agent, CST Trust Company. • By mail — Complete, date and sign this form and mail it to CST Trust Company.	• By appointing someone else to attend the meeting for you — This person does not need to be a shareholder (see section 2). Make sure your appointee is aware of it and attends the meeting for you. Your proxyholder will need to see a representative of CST Trust Company when they arrive at the meeting. If you are voting by proxy, please complete all five sections of this form, date and sign it, and return it right away.

Your control number:

Appoint a proxyholder

You can appoint Tim Gitzel or Sean Quinn to be your proxyholder,
or choose someone else to represent you and vote your shares at the meeting.

This person does not need to be a shareholder.

You appoint Tim Gitzel, or in his absence, Sean Quinn.

You appoint the following person to attend the meeting and vote on your behalf:

If you do not check one of the boxes, we will assume you have appointed Tim Gitzel, or in his absence, Sean Quinn as your proxyholder.

Tell us your voting instructions

When you complete this section, you are directing your proxyholder to follow these instructions when voting.

Our board of directors and management recommend that shareholders vote For these items.

If you do not specify how you want to vote your shares:

•

the Cameco officer you appointed as your proxyholder in section 2 will vote For each of the items below

•

the other proxyholder you appointed in section 2 can vote as he or she sees fit

Elect the directors

(see page 5 of the management proxy circular)

For

Withhold

For

Withhold

1. Ian Bruce

6. Tim Gitzel

2. Daniel Camus

7. Jim Gowans

3. John Clappison

8. Don Kayne

4. Donald Deranger

9. Anne McLellan

5. Catherine Gignac

10. Neil McMillan

Appoint the auditors

(see page 5 of the management proxy circular)

For

Withhold

Appoint KPMG LLP as auditors

Have a say on our approach to executive compensation

(see page 6 of the management proxy circular)

As this is an advisory vote, the results will not be binding on the board.

For

Against


4	Sign and date When you sign here, you are:
	•	authorizing your proxyholder to vote according to your voting instructions at Cameco’s 2016 annual meeting of shareholders, or any meeting that is reconvened if it was postponed or adjourned
	•	revoking any proxy that you previously gave for this meeting.
	For shares registered in the name of a corporation, estate, trust or minor, an authorized officer or attorney must sign this form and state his or her position. This person may also have to provide proof that he or she is authorized to sign.


		Signature
		(if your shares are held in more than one name, either person can sign this form)


		Date
		(if you leave this blank, we will consider the date to be the day this form was received by or on behalf of us)


		Position
		(complete this if you are a guardian, or signing by power of attorney or on behalf of a corporation, estate or trust)
5		Vote by fax or mail We must receive your completed form before 8:30 a.m. CST on Monday, May 9, 2016. If the meeting is postponed or adjourned, we must receive the form at least 48 hours (excluding Saturdays, Sundays and holidays) before the meeting is reconvened.
5		The chair of the meeting has the discretion to accept or reject any late proxies, and can waive or extend the deadline for receiving proxy voting instructions without notice.


				By fax				By mail
				Toll free from anywhere in North America:				Use the envelope provided or mail to:
				1.866.781.3111				CST Trust Company Attn: Proxy department P.O. Box 721 Agincourt, Ontario M1S 0A1
				From outside North America:
				1.416.368.2502
				Remember to fax both pages of this form.
				Remember to fax both pages of this form.

				Vote by internet
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EX-99.4

Exhibit 99.4

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Cameco 2015 ANNUAL REPORT

➊ Mining

Once an orebody is discovered and defined by exploration, there are three common ways to mine uranium, depending on the depth of the orebody and the deposit’s geological characteristics:

● Open pit mining is used if the ore is near the surface. The ore is usually mined using drilling and blasting.

● Underground mining is used if the ore is too deep to make open pit mining economical. Tunnels and shafts provide access to the ore.

● In situ recovery (ISR) does not require large scale excavation. Instead, holes are drilled into the ore and a solution is used to dissolve the uranium. The solution is pumped to the surface where the uranium is recovered.

➊ Milling

Ore from open pit and underground mines is processed to extract the uranium and package it as a powder typically referred to as uranium concentrates (U₃O₈) or yellowcake. The leftover processed rock and other solid waste (tailings) is placed in an engineered tailings facility.

➋ Refining

Refining removes the impurities from the uranium concentrate and changes its chemical form to uranium trioxide (UO₃).

➌ Conversion

For light water reactors, the UO₃ is converted to uranium hexafluoride (UF₆) gas to prepare it for enrichment. For heavy water reactors like the CANDU reactor, the UO₃ is converted into powdered uranium dioxide (UO₂).

➍ Enrichment

Uranium is made up of two main isotopes: U-238 and U-235. Only U-235 atoms, which make up 0.7% of natural uranium, are involved in the nuclear reaction (fission). Most of the world’s commercial nuclear reactors require uranium that has an enriched level of U-235 atoms.

The enrichment process increases the concentration of U-235 to between 3% and 5% by separating U-235 atoms from the U-238. Enriched UF₆ gas is then converted to powdered UO₂.

➎ Fuel manufacturing

Natural or enriched UO₂ is pressed into pellets, which are baked at a high temperature. These are packed into zircaloy or stainless steel tubes, sealed and then assembled into fuel bundles.

➏ Generation

Nuclear reactors are used to generate electricity. U-235 atoms in the reactor fuel fission, creating heat that generates steam to drive turbines. The fuel bundles in the reactor need to be replaced as the U-235 atoms are depleted, typically after one or two years depending upon the reactor type. The used – or spent – fuel is stored or reprocessed.

Spent fuel management

The majority of spent fuel is safely stored at the reactor site. A small amount of spent fuel is reprocessed. The reprocessed fuel is used in some European and Japanese reactors.

Message from the Chair

Dear Shareholder,

Thank you for your continued interest in Cameco. In 2015, market conditions continued to challenge the industry and the company. In that context, the board focused on achieving steady progress on Cameco’s four measures of success, and paid particular attention to strategy and value creation, risk oversight and board governance. These are the areas we see as fundamental to Cameco’s sustainability as a competitive, low-cost uranium producer.

Strategy is particularly important, given the challenge the market currently poses. It is crucial that the company remain flexible and able to respond to changes as they occur – whether positive or negative. As a result, we discuss corporate strategy at every regular board meeting. And, we work with management to ensure the strategy addresses both near- and medium-term challenges, while also positioning Cameco to benefit from the growth in demand we anticipate over the long term. In 2015, this work also included two in-depth strategic planning sessions with management.

Just as important as strategy, and closely related to it, is risk. The board’s focus includes both strategic risks and the structured enterprise risk management (ERM) program that assigns oversight of certain risks to specific board committees. This program has been developed and refined over the past several years, and we are pleased with the result, which earned Cameco the inaugural 2015 Achievement in Private Sector Risk Management award. The award recognizes Cameco for excellence in Canadian risk, control and audit management practices.

And while we have a robust outward focus, the board also has a strong inward focus – continually evaluating the composition and skill set of the board to ensure it is best able to serve the company and remain at the forefront of good governance. The board, committee and director assessments we conduct every year help us improve our own processes and the work we do as Cameco directors. The chair of the nominating, corporate governance and risk committee also meets individually with each director to review their assessment, capacity and commitment to Cameco’s board.

In that same vein, we also undertake a regular review of our competency and attribute matrix and diversity policy. In 2015, that review resulted in a director search that led to the appointment of a new board member – Donald Kayne, CEO of Canfor Corporation and Canfor Pulp Products Inc. Don’s CEO experience and knowledge of rapidly expanding Asian markets brings a unique and useful perspective to our board. We are also currently in the midst of a search for a female director with appropriate industry experience and other relevant skills.

In 2016, we will also be saying goodbye to two of our members – Jim Curtiss and Nancy Hopkins. The board has benefited from Jim’s vast experience in the US nuclear sector and his expertise in executive compensation as chair of the human resources and compensation committee for the last 14 years.

Nancy has been instrumental in driving many of Cameco’s strong governance practices, and, over the course of her tenure, she has chaired the nominating, corporate governance and risk committee, audit and finance committee, and human resources and compensation committee. We wish them well.

Looking forward, we will continue to maintain our focus on strong governance and building shareholder value. We remain confident of the prospects for strong growth for both Cameco and the nuclear industry, and continue to prepare for it. The board and management thank you for your continued confidence.

Sincerely,

Neil McMillan

Chair of the board

March 14, 2016


Cameco Board of Directors Our directors as at December 31, 2015 are listed below.
More information is available in our proxy circular.
Ian Bruce Former President and CEO of Peters & Co. Limited Daniel Camus Former group CFO and head of strategy and international activities of Electricité de France SA John Clappison Former managing partner of the Greater Toronto Area office of PricewaterhouseCoopers LLP	James Curtiss Former commissioner of the US Nuclear Regulatory Commission, currently Principal of Curtiss Law Donald Deranger Advisor to the Athabasca Basin Development Corporation and non- executive chair of the board of Points Athabasca Contracting Limited Partnership	Catherine Gignac Former Principal of Catherine Gignac & Associates Tim Gitzel President and CEO of Cameco James Gowans President and CEO of Arizona Mining Inc.	Nancy Hopkins Partner with the law firm McDougall Gauley LLP Anne McLellan Former Deputy Prime Minister of Canada, currently counsel in Bennett Jones LLP Neil McMillan Former President and CEO of Claude Resources Inc.

Message from the CEO

Dear Shareholder,

Every year in this message, we look back at the year Cameco has had – the successes and the challenges. This year, I think it is significant that, at the time of writing, it has been five years since the accident at Fukushima when, overnight, the nuclear industry was turned upside down. I can tell you, just days before the accident, we at Cameco were talking about how we would meet the growth in uranium demand we saw on the horizon. And, to be honest, we weren’t sure how we were going to do it. The growth in nuclear coming from all corners of the globe was enormous – the US reactor fleet was growing, China was starting to build reactors at an unprecedented pace, and previously non-nuclear countries were starting to build. It was a great time to be in the industry.

I think it’s safe to say that no one knew just how much of an impact Fukushima would have, and for how long. We certainly didn’t think oversupply and low uranium prices would last for five years. But larger global drivers, like a sluggish economy, slower growth, flat electricity demand, and a host of other external factors have also conspired against us.

However, the challenges we have faced have also provided a lot of opportunity, the most significant of which has been the chance to improve as a company. Continual improvement has always been a priority for us, but extended market challenges meant we needed to take a hard look at our strategy, objectives, processes, in fact, every nook and cranny of our company, to find ways to be more efficient, more innovative, more effective. And it’s been impressive to see how well our people have risen to the challenge.

The result is a company that has the strength and flexibility to continue weathering market challenges as long as we need to, but also a company that is better prepared for the future. The streamlining of our business and the sharper focusing of our strategy on our tier-one assets means that when the market does turn, we will be even better positioned to benefit.

And we know that shift is going to happen. We know there’s a huge amount of growth in reactor construction, being led by China, India and South Korea, all of which have reactors under construction and brought new reactors online in 2015. We know there’s going to be growth in uranium demand as these new reactors come online over the next number of years. And, we know that supply will struggle to keep up, as investment in new projects is just not happening, existing projects are being deferred or cancelled, and existing supply is being curtailed. So, over the long term, we remain as optimistic as ever.

That doesn’t change the fact that the challenges we face today are real, and must be surmounted. But Cameco continues to return strong results. In 2015, we achieved record uranium production and exceeded our expectations at Cigar Lake, which performed exceptionally well. We delivered on our guidance. And, we returned excellent safety results – table stakes for our company.

Today, we are on track to continue this trend. We remain on track with our tier-one strategy, which focuses on our best-margin assets. We remain on track at Cigar Lake, which should reach full production of 18 million pounds per year in 2017. And, we remain on track to be ready when the market calls for more uranium.

Because it is a question of ‘when’, not ‘if’ more uranium is needed. The strong fundamentals that made us wonder five years ago how we would meet the growth in demand have not

greatly changed; for the most part, they have just been moved further out in time. There is still a growing population that requires access to electricity. Nuclear is still an important part of the energy portfolio for many countries, especially those needing more baseload power. There is still investment in nuclear occurring that has not been seen in decades. And there is still going to be a need for more uranium – perhaps even more so now that many projects have been delayed or cancelled in the wake of low uranium prices. Those are prospects that keep us excited.

Tim Gitzel

President and CEO

March 14, 2016


Senior Management Team You can read more about our senior executive team
on our website, at cameco.com

Tim Gitzel	Sean Quinn	Alice Wong
President and	Senior Vice-President, Chief Legal	Senior Vice-President and
Chief Executive Officer	Officer and Corporate Secretary	Chief Corporate Officer

Grant Isaac	Robert Steane
Senior Vice-President and	Senior Vice-President and
Chief Financial Officer	Chief Operating Officer

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Management’s discussion and analysis

February 5, 2016


6		2015 PERFORMANCE HIGHLIGHTS

8		MARKET OVERVIEW AND 2015 DEVELOPMENTS

14		OUR STRATEGY

21		MEASURING OUR RESULTS

23		FINANCIAL RESULTS

51		OUR OPERATIONS AND PROJECTS

80		MINERAL RESERVES AND RESOURCES

85		ADDITIONAL INFORMATION

88		2015 CONSOLIDATED FINANCIAL STATEMENTS

This management’s discussion and analysis (MD&A) includes information that will help you understand management’s perspective of our audited consolidated financial statements (financial statements) and notes for the year ended December 31, 2015. The information is based on what we knew as of February 4, 2016.

We encourage you to read our audited consolidated financial statements and notes as you review this MD&A. You can find more information about Cameco, including our financial statements and our most recent annual information form, on our website at cameco.com, on SEDAR at sedar.com or on EDGAR at sec.gov. You should also read our annual information form before making an investment decision about our securities.

The financial information in this MD&A and in our financial statements and notes are prepared according to International Financial Reporting Standards (IFRS), unless otherwise indicated.

Unless we have specified otherwise, all dollar amounts are in Canadian dollars.

Throughout this document, the terms we, us, our, the Company and Cameco mean Cameco Corporation and its subsidiaries, including NUKEM Energy GmbH (NUKEM), unless otherwise indicated.

Caution about forward-looking information

Our MD&A includes statements and information about our expectations for the future. When we discuss our strategy, plans, future financial and operating performance, or other things that have not yet taken place, we are making statements considered to be forward-looking information or forward-looking statements under Canadian and United States (US) securities laws. We refer to them in this MD&A as forward-looking information.

Key things to understand about the forward-looking information in this MD&A:

•

It typically includes words and phrases about the future, such as: anticipate, believe, estimate, expect, plan, will, intend, goal, target, forecast, project, strategy and outlook (see examples below).

•

It represents our current views, and can change significantly.

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It is based on a number of material assumptions, including those we have listed on page 3, which may prove to be incorrect.

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Actual results and events may be significantly different from what we currently expect, due to the risks associated with our business. We list a number of these material risks on pages 2 and 3. We recommend you also review our annual information form, which includes a discussion of other material risks that could cause actual results to differ significantly from our current expectations.

•

Forward-looking information is designed to help you understand management’s current views of our near and longer term prospects, and it may not be appropriate for other purposes. We will not necessarily update this information unless we are required to by securities laws.

Examples of forward-looking information in this MD&A

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our expectations about 2016 and future global uranium supply, consumption, demand, contracting volumes, number of reactors and nuclear generating capacity, including the discussion under the headings Market overview and 2015 developments

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the discussion under the heading Our strategy

•

our 2016 objectives

•

our expectations for uranium deliveries in 2016

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the discussion of our expectations relating to our transfer pricing disputes, including our estimate of the amount and timing of expected cash taxes and transfer pricing penalties

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our consolidated outlook for the year and the outlook for our uranium, fuel services and NUKEM segments for 2016

•

our expectations for future tax payments and rates

•

our expectations for future royalty payments

•

our price sensitivity analysis for our uranium segment

•

our expectation that existing cash balances and operating cash flows will meet our anticipated 2016 capital requirements without the need for any significant additional funding, other than we may need to temporarily draw on other short-term liquidity during the course of the year

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our expectations for 2016, 2017 and 2018 capital expenditures

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our expectation that in 2016 we will continue to comply with all the covenants in our unsecured revolving credit facility

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our future plans and expectations for each of our uranium operating properties and projects under evaluation, and fuel services operating sites

•

our mineral reserve and resource estimates

Material risks

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actual sales volumes or market prices for any of our products or services are lower than we expect for any reason, including changes in market prices or loss of market share to a competitor

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we are adversely affected by changes in currency exchange rates, interest rates, royalty rates, or tax rates

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our production costs are higher than planned, or necessary supplies are not available, or not available on commercially reasonable terms

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our estimates of production, purchases, costs, decommissioning or reclamation expenses, or our tax expense estimates prove to be inaccurate

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we are unable to enforce our legal rights under our existing agreements, permits or licences

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we are subject to litigation or arbitration that has an adverse outcome, including lack of success in our disputes with tax authorities

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we are unsuccessful in our dispute with Canada Revenue Agency (CRA) and this results in significantly higher cash taxes, interest charges and penalties than the amount of our cumulative tax provision

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we are unable to utilize letters of credit to the extent anticipated in our dispute with CRA

•

there are defects in, or challenges to, title to our properties

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our mineral reserve and resource estimates are not reliable, or we face unexpected or challenging geological, hydrological or mining conditions

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we are affected by environmental, safety and regulatory risks, including increased regulatory burdens or delays

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we cannot obtain or maintain necessary permits or approvals from government authorities

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we are affected by political risks

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we are affected by terrorism, sabotage, blockades, civil unrest, social or political activism, accident or a deterioration in political support for, or demand for, nuclear energy

•

we are impacted by changes in the regulation or public perception of the safety of nuclear power plants, which adversely affect the construction of new plants, the relicensing of existing plants and the demand for uranium

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there are changes to government regulations or policies that adversely affect us, including tax and trade laws and policies

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our uranium suppliers fail to fulfil delivery commitments

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our McArthur River development, mining or production plans are delayed or do not succeed for any reason

2 CAMECO CORPORATION

•

our Cigar Lake development, mining or production plans are delayed or do not succeed, including as a result of any difficulties with freezing the deposit to meet production targets, or any difficulties with the McClean Lake mill modifications or expansion or milling of Cigar Lake ore

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the production increase approval at McClean Lake is delayed or not obtained, or there is a labour dispute at McClean Lake

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we are affected by natural phenomena, including inclement weather, fire, flood and earthquakes

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our operations are disrupted due to problems with our own or our customers’ facilities, the unavailability of reagents, equipment, operating parts and supplies critical to production, equipment failure, lack of tailings capacity, labour shortages, labour relations issues (including an inability to renew the collective bargaining agreement with unionized employees at the Port Hope conversion facility), strikes or lockouts, underground floods, cave-ins, ground movements, tailings dam failures, transportation disruptions or accidents, or other development and operating risks

Material assumptions

•

our expectations regarding sales and purchase volumes and prices for uranium and fuel services

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our expectations regarding the demand for uranium, the construction of new nuclear power plants and the relicensing of existing nuclear power plants not being more adversely affected than expected by changes in regulation or in the public perception of the safety of nuclear power plants

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our expected production level and production costs

•

the assumptions regarding market conditions upon which we have based our capital expenditures expectations

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our expectations regarding spot prices and realized prices for uranium, and other factors discussed under the heading Price sensitivity analysis: uranium segment

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our expectations regarding tax rates and payments, royalty rates, currency exchange rates and interest rates

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our expectations about the outcome of disputes with tax authorities

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we are able to utilize letters of credit to the extent anticipated in our dispute with CRA

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our decommissioning and reclamation expenses

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our mineral reserve and resource estimates, and the assumptions upon which they are based, are reliable

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the geological, hydrological and other conditions at our mines

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our McArthur River development, mining and production plans succeed

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our Cigar Lake development, mining and production plans succeed, and the deposit freezes as planned

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modification and expansion of the McClean Lake mill are completed as planned and the mill is able to process Cigar Lake ore as expected

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the production increase approval at McClean Lake is approved by the regulator and there is no labour dispute at the McClean Lake mill

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our ability to continue to supply our products and services in the expected quantities and at the expected times

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our ability to comply with current and future environmental, safety and other regulatory requirements, and to obtain and maintain required regulatory approvals

•

our operations are not significantly disrupted as a result of political instability, nationalization, terrorism, sabotage, blockades, civil unrest, breakdown, natural disasters, governmental or political actions, litigation or arbitration proceedings, the unavailability of reagents, equipment, operating parts and supplies critical to production, labour shortages, labour relations issues (including an ability to renew the collective bargaining agreement with unionized employees at the Port Hope conversion facility), strikes or lockouts, underground floods, cave-ins, ground movements, tailings dam failure, lack of tailings capacity, transportation disruptions or accidents, or other development or operating risks

2015 Annual Report 3

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4 CAMECO CORPORATION

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2015 Annual Report 5

2015 performance highlights

Cameco performed well in 2015, navigating the challenging market conditions, while continuing to prepare for the positive long-term growth we see coming in the industry.

Financial performance


HIGHLIGHTS
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED)	2015		2014		CHANGE
Revenue		2,754		2,398		15	%
Gross profit		697		638		9	%
Net earnings attributable to equity holders		65		185		(65	)%
$ per common share (diluted)		0.16		0.47		(65	)%
Adjusted net earnings (non-IFRS, see page 25)		344		412		(17	)%
$ per common share (adjusted and diluted)		0.87		1.04		(16	)%
Cash provided by operations (after working capital changes)		450		480		(6	)%

Net earnings attributable to equity holders (net earnings) and adjusted net earnings were lower in 2015 compared to 2014. However, significant weakness in the Canadian dollar in 2015 resulted in record annual consolidated revenue of $2.8 billion, and record annual revenue from our uranium segment of $1.9 billion based on sales of 32.4 million pounds at a record Canadian dollar average realized price of $57.58 per pound. See 2015 consolidated financial results beginning on page 24 for more information.

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Solid progress in our uranium segment this year

In our uranium segment, we exceeded our annual production expectations, and realized a number of successes at our mining operations. Key highlights:

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record annual production of 28.4 million pounds—4% higher than the guidance provided in our 2015 third quarter MD&A

•

record quarterly production of 9.6 million pounds in the fourth quarter—17% higher than in 2014, largely due to production from Cigar Lake

•

exceeded planned production at the Cigar Lake mine and AREVA’s McClean Lake mill

We continued to advance exploration activities, spending $2 million on four brownfield exploration projects, $4 million on our projects under evaluation in Australia, and $2 million at Inkai and our US operations. We spent about $32 million on regional exploration programs, mostly in Saskatchewan and Australia.

Updates on our other segments and investments

Production in 2015 from our fuel services segment was 16% lower than in 2014. We continue to face weak market conditions for conversion services, and have decided to further reduce production at Port Hope in 2016.

6 CAMECO CORPORATION

On January 31, 2014, we announced the sale of our 31.6% limited partnership interest in Bruce Power Limited Partnership (BPLP) and related entities for $450 million. The sale closed on March 27, 2014, and was accounted for as being completed effective January 1, 2014.


HIGHLIGHTS			2015		2014		CHANGE
Uranium	Production volume (million lbs)			28.4		23.3		22	%
	Sales volume (million lbs)¹			32.4		33.9		(4	)%
	Average realized price	($US/lb)		45.19		47.53		(5	)%
		($Cdn/lb)		57.58		52.37		10	%
	Revenue ($ millions)¹			1,866		1,777		5	%
	Gross profit ($ millions)			608		602		1	%
Fuel services	Production volume (million kgU)			9.7		11.6		(16	)%
	Sales volume (million kgU)¹			13.6		15.5		(12	)%
	Average realized price	($Cdn/kgU)		23.37		19.70		19	%
	Revenue ($ millions)¹			319		306		4	%
	Gross profit ($ millions)			61		38		61	%
NUKEM	Sales volume U₃O₈ (million lbs)¹			10.7		8.1		32	%
	Average realized price	($Cdn/lb)		48.82		44.90		9	%
	Revenue ($ millions)¹			554		349		59	%
	Gross profit ($ millions)			42		22		91	%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments. Please see 2015 Financial results by segment beginning on page 43.

SHARES AND STOCK OPTIONS OUTSTANDING

At February 3, 2016, we had:

•

395,792,522 common shares and one Class B share outstanding

•

8,481,833 stock options outstanding, with exercise prices ranging from $19.30 to $54.38

DIVIDEND POLICY

Our board of directors has established a policy of paying a quarterly dividend of $0.10 ($0.40 per year) per common share. This policy will be reviewed from time to time based on our cash flow, earnings, financial position, strategy and other relevant factors.

2015 Annual Report 7

Market overview and 2015 developments

The world needs energy

It’s no secret the world needs more energy. The world’s population increasing from 7 billion to 9 billion over the next two decades will drive the need for energy, but, even today, there are 2 billion people who lack access to electricity or have only limited access. This is unacceptable in today’s modern world, where electricity is one of the greatest contributors to quality of life. Many countries are working to fill that gap and, in many cases, to keep up with rapid growth. Nuclear energy is an important option in the world’s energy mix, and, as energy demand continues to grow, nuclear is expected to do the same.

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Nuclear – an integral part of the energy mix

Today, nuclear power contributes 11% of global electricity. While that percentage is not expected to change significantly over the next two decades, nuclear power output is expected to change—increasing along with rising electricity demand. In other words, the nuclear story is a growth story.

It’s easy to see why. Nuclear power is a safe, clean, reliable, affordable, and, most importantly, baseload energy source. As a result, it is an integral part of the energy mix for many countries, and even more so as the focus on climate change and clean air intensifies. Not only does it provide baseload power—that 24-hour power required to have health care, education, transportation, and communication systems—but it does so without emitting greenhouse gases (GHGs).

Reactors – gigawatt growth

That’s why, today, we see billions of dollars being invested in nuclear around the world. By 2025, we expect to see around 113 new reactors built, more than 60 of which are under construction right now. In addition, some existing plants are also adding capacity through uprates. Although this growth will be tempered somewhat by the closure of around 55 reactors, the end result is growth in the range of 80 gigawatts of nuclear power added to the world’s grids over the next decade, and even more expected outside that time frame.

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8 CAMECO CORPORATION

The areas of the world where we are seeing the most growth are those with increasing populations and rapidly expanding economies. China continues to lead the way with 24 reactors under construction. India, Russia, South Korea, United Arab Emirates (UAE), and the United States are also building new reactors. Of the reactors under construction today, if startups occur as planned, 65% of those units could be online over the next three years.

Elsewhere, the United Kingdom (UK) government is maintaining its commitment to nuclear energy as a source of emissions-free energy. Critical milestones have been reached, allowing new build plans to move forward. In addition, several previously non-nuclear countries are moving ahead with their reactor construction programs or considering adding nuclear to their energy mix in the future. Construction continues on four units in the UAE. Turkey is also moving forward with plans to build eight new reactors. Bangladesh, Vietnam, Jordan, Poland, Saudi Arabia, and Egypt are a few more of the countries continuing their plans to proceed with nuclear power development.

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As we expand our 10-year market analysis by one year, the net new reactor count at the end of the window changes from about 80 net new reactors previously expected by 2024, to about 58 net new reactors expected by 2025. Although this change in growth expectations impacts the expected demand in the later years of our industry outlook, it does not influence our view of the market fundamentals and is primarily a function of rolling our analysis forward. This year, the change is related to:

•

a number of new reactors that came online in 2015 and are now in the “Operable” category, rather than the “New build” category

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several reactors that are scheduled to be shut down in 2025, which are now included in our 10-year window, as well as additional shutdowns announced in 2015, increasing the “Retirements” category

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low electricity prices and flat demand, in conjunction with delays in finalizing energy policies, contributing to the announcement of construction delays for some reactors in the outermost years of the 10-year window, pushing the affected units beyond 2025 and removing them from the current “New build” category

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2015 Annual Report 9

More reactors means more demand for uranium

Today, the world’s reactors consume around 160 million pounds of uranium annually. With the growth in reactor construction, we expect that to grow to around 220 million pounds per year by 2025—average annual growth of 3%. This does not include the strategic inventory building that usually occurs with new reactor construction, which would mean even further growth in demand. So, over the long term, we see very strong growth in the demand for the products that we supply.

Can supply keep up?

Over the long term, while demand is increasing, supply, without new investment, is expected to decrease, resulting in the possibility of a widening gap between supply and demand.

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There is already a gap between the uranium consumed by reactors and the uranium produced from the world’s mines, which has been the case for several years. That gap has been bridged by secondary supplies—uranium in various forms that is already out of the ground and sitting in stockpiles around the world. Today, about 20% of global supply comes from secondary sources, but those stockpiles are being drawn down, and are expected to contribute less and less over time. This means that more primary production will be needed from uranium mines—in fact, we estimate about 10% of total supply required over the next decade will need to come from new mines that are not yet in development.

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But that could be difficult. In general, new mines are difficult to bring on in a timely manner. The long lead nature of mine development means our industry is not able to respond quickly to sudden increases in demand or significant supply interruptions. Bringing on and ramping up a significant new production centre can take between seven and 10 years.

10 CAMECO CORPORATION

Adding to the challenge are the number of new projects being cancelled or delayed, and the existing production being shelved due to the low uranium prices that have persisted since the 2011 events at the Fukushima-Daiichi nuclear power plant in Japan. Today’s uranium prices are not high enough to incent new mine production and, in some cases, not high enough to keep current mines in operation. While some new mines may be brought on regardless of price as a result of sovereign interests or to cover existing commitments, overall, we expect supply to decrease over time due to the global lack of investment.

Today – little demand, a lot of supply

Today, the uranium market continues to be in a state of oversupply, and there are a number of factors contributing: primary supply continues to perform relatively well; enrichers are underfeeding their plants in reaction to excess enrichment capacity, which creates another source of uranium; the majority of Japan’s reactors remain idled, meaning their inventories continue to grow and Japanese utilities will be well covered for some time; and the new reactors under construction today have not yet started to consume the inventories that have been purchased and stored for their operation.

In addition, market activity is much lighter than it has been in the past. Utilities are well covered in their fuel requirements and are not under pressure to contract for more. They have time to wait it out to see if uranium prices continue to decrease. So far, this strategy has paid off for them. Similarly, existing suppliers appear reluctant to enter into meaningful contract volumes at current prices. The result has been very low levels of contracting over the past three years. Consumption is a fairly simple and constant equation based on the fuel needs of operating reactors and, historically, the quantity of material contracted in the long-term market in a year has been roughly equivalent to the quantity of uranium consumed in the world’s reactors in a year. In fact, only 35% of the uranium consumed in nuclear reactors over the past three years has been replaced by utilities with long-term contracts. That’s less than 180 million pounds contracted when about 475 million pounds were used, meaning inventories and the current oversupply are being drawn down as future requirements remain uncovered. If contracting is not happening now, it will have to later; the demand has just been pushed further out in time.

2015 market developments

THE GOOD, THE BAD AND THE INDIFFERENT

As has been the case in recent years, a lot happened over the course of 2015, although the general state of the market did not see much change.

Making positive news for nuclear, as usual, was China. Not only did the country continue with its rapid reactor new build program and bring eight reactors online, but Chinese companies also signed agreements with Argentina, Romania and the UK for new reactors, illustrating the country’s commitment to nuclear and its intent to become a major international player in the nuclear industry.

Undoubtedly, the biggest headline of 2015 was the long-awaited first reactor restarts in Japan. Sendai units 1 and 2 were the first reactors in Japan to restart since 2013, and it is hoped they are the first of many to come.

New builds in the UK and US continued to be bright spots for the industry, in addition to a number of reactor life extensions approved in Japan, and the US, with utilities now considering additional extensions that could see reactor lives reaching 80 years.

However, these positive developments could not outweigh the more powerful influence of a continued sluggish global economy, geopolitical issues, concerns around growth in China, and flat electricity demand. These more general drivers had help from industry specific factors as well, such as slower new reactor construction, eight reactor shutdowns, the continued high level of inventories held by market participants, and France’s policy to reduce nuclear in their energy mix to 50% by 2025 becoming law.

In addition, supply performed relatively well, with only minor disruptions and one curtailment, unlike 2014, which saw six projects tempered or curtailed.

The end result was a market seemingly indifferent to the commotion of events that occurred throughout the year.

2015 Annual Report 11

CONTRACTING

Market contracting activity was modest. Spot volumes were normal, but long-term contracting was well below historical averages and current consumption levels—about half of current annual reactor consumption estimates, similar to 2014. Long-term contracting is a key factor in the timing of market recovery, and its pace will depend on the respective coverage levels, market views and risk appetite of both buyers and sellers.

LOGO

JAPAN

The big news in Japan was the restart of Sendai units 1 and 2, which occurred in August and October. In addition, the court injunction against the two Takahama units was overturned in December, 2015, clearing the way for Takahama unit 3 to restart on January 29, 2016, with unit 4 expected to restart later in the first quarter. Ikata unit 3 has also cleared a safety inspection by the Nuclear Regulatory Authority, and four more units are in the final stages of approval. In all, three reactors are now in operation, while 23 remain under evaluation for restart.

Over the long term, Japan’s energy policy states that nuclear will make up 20 to 22% of the energy mix in the country. The billions of dollars in investment being made by Japan’s utilities suggest a high degree of confidence in reactors coming back online and meeting this target; however, public sentiment towards nuclear in Japan remains somewhat uncertain.

OTHER REGIONS

China’s remarkable nuclear growth program remains on track and the UK’s plans for new reactor construction continue to move forward. India and South Korea are also among several key regions growing their nuclear generation fleet.

In 2015, growth was tangible as 10 reactors came online—double that of 2014. These included the eight noted in China, one in Russia and one in South Korea. And seven more reactors began construction—six in China and one in the UAE, a formerly non-nuclear country with four reactors now under construction.

But, to round out the picture, eight units shut down. Five of these were in Japan, plus one in Sweden, one in Germany as part of its phase-out plans, and one in the UK—the last Magnox reactor operating in the world. In addition, there were announcements for future shutdowns in the US, where nuclear struggles to remain competitive in deregulated electricity markets and in the context of low natural gas prices.

One event that could have an effect on the future of nuclear in the US and other western countries is the UN Climate Conference COP-21 agreement, finalized in 2015. As a non-GHG emitter, nuclear could play a significant role in achieving climate change prevention goals.

12 CAMECO CORPORATION

Industry prices

In 2015, the spot price declined from a high of $39 (US) per pound to a low of about $34 (US) per pound, but managed to average around $37 (US) for the year. Utilities continue to be well covered under existing contracts, and, given the current uncertainties in the market, we expect they and other market participants will continue to be opportunistic in their buying. As a result, contracting is expected to remain somewhat discretionary in 2016.


	2015		2014		CHANGE
Uranium ($US/lb U₃O₈)¹
Average spot market price		36.55		33.21		10	%
Average long-term price		46.29		46.46		—
Fuel services ($US/kgU as UF₆)¹
Average spot market price
North America		7.35		7.63		(4	)%
Europe		7.85		7.97		(2	)%
Average long-term price
North America		15.33		16.00		(4	)%
Europe		16.38		17.00		(4	)%

Note: the industry does not publish UO₂ prices.

¹	Average of prices reported by TradeTech and Ux Consulting (Ux)

LOGO

2015 Annual Report 13

Our strategy

Positioned for success

Our strategy is set within the context of a challenging market environment, which we expect to give way to strong long-term fundamentals driven by increasing population and electricity demand.

We are a pure-play nuclear fuel producer, focused on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals in order to increase long-term shareholder value, and to do that with an emphasis on safety, people and the environment.

URANIUM

Uranium production is central to our strategy, as it is the biggest value driver of the nuclear fuel cycle and our business. We plan to focus on our tier-one assets and manage our supply according to market conditions in order to return the best value possible. As conditions improve, we expect to meet rising demand with increased production from our best margin operations. See Uranium – production overview on page 54 for additional details.

FUEL SERVICES

Our fuel services division is a source of profit and supports our uranium segment while allowing us to vertically integrate across the fuel cycle. Our focus is on maintaining and optimizing profitability.

ENRICHMENT

We continue to explore opportunities in the second largest value driver of the fuel cycle.

NUKEM

NUKEM’s activities provide a source of profit and give us insight into market dynamics.

Capital allocation – focus on value

Delivering returns to our long-term shareholders is a top priority. We continually evaluate our investment options to ensure we allocate our capital in a way that we believe will:

•

create the greatest long-term value for our shareholders

•

allow us to maintain our investment grade rating

•

ensure we execute on our dividend policy

To deliver value, free cash flow must be productively reinvested in the business or returned to shareholders, which requires good execution and disciplined allocation. We have a multidisciplinary capital allocation team that evaluates all possible uses of investable capital.

We start by determining how much cash we have to invest (investable capital), which is based on our expected cash flow from operations minus expenses we consider to be a higher priority, such as dividends and financing costs, and could include others. This investable capital can be reinvested in the company or returned to shareholders.

Today, considering the continued near-term uncertainty, we believe the best way to create value is to focus on expanding our tier-one assets and maintaining a strong balance sheet. This provides us with the opportunity to gain operating leverage as the market transitions to being demand driven, and mitigates risk in the event of a prolonged period of uncertainty.

REINVESTMENT

Before investable capital is reinvested in sustaining, capacity replacement or growth, all opportunities are ranked and only those that meet the required risk-adjusted return criteria are considered for investment. We also must identify, at the corporate level, the expected impact on cash flow, earnings and the balance sheet. All project risks must be identified, including the risks of not investing. Allocation of capital only occurs once an investment has cleared these hurdles.

This may result in some opportunities being held back in favour of higher return investments, and should allow us to generate the best return on investment decisions when faced with multiple prospects, while also controlling our costs. If there are not enough good growth prospects internally or externally, this may result in residual investable capital, which we would then consider returning directly to shareholders.

14 CAMECO CORPORATION

RETURN

If we determine the best use of cash is to return it to shareholders, we can do that through a share repurchase or dividend—either a one-time special dividend or a dividend growth policy. When deciding between these options, we consider a number of factors, including generation of excess cash, growth prospects for the company, growth prospects for the industry, and the nature of the excess cash.

Share buyback: If we were generating excess cash while there were little or no growth prospects for the company or the industry, then a share buyback might make sense. However, our current view is that the long-term fundamentals for Cameco and the industry remain strong.

Dividend: We view our dividend as a priority. Therefore, any change to our dividend policy must be carefully considered with a view to long-term sustainability. Currently, the conditions in the uranium market do not provide us with the level of certainty we require to implement changes to our dividend policy.

Marketing strategy – balanced contract portfolio

As with our corporate strategy and approach to capital allocation, the purpose of our marketing strategy is to deliver value. Our approach is to secure a solid base of earnings and cash flow by maintaining a balanced contract portfolio that optimizes our realized price.

Uranium is not traded in meaningful quantities on a commodity exchange. Utilities buy the majority of their uranium and fuel services products under long-term contracts with suppliers, and meet the rest of their needs on the spot market. We sell uranium and fuel services directly to nuclear utilities around the world as uranium concentrates, UO₂, UF₆, conversion services or fuel fabrication. We have an extensive portfolio of long-term sales contracts that reflect the long-term, trusting relationships we have with our customers.

In addition, we are active in the spot market, buying and selling uranium when it is beneficial for us. Our NUKEM business segment enhances our ability to participate, as they are one of the world’s leading traders of uranium and uranium-related products. We undertake activity in the spot market prudently, looking at the spot price and other business factors to decide whether it is appropriate to purchase or sell into the spot market. Not only is this activity a source of profit, it gives us insight into underlying market fundamentals.

OPTIMIZING REALIZED PRICE

We try to maximize our realized price by signing contracts with terms between five and 10 years (on average) that include mechanisms to protect us when market prices decline and allow us to benefit when market prices go up.

Because we deliver large volumes of uranium every year, our net earnings and operating cash flows are affected by changes in the uranium price. Market prices are influenced by the fundamentals of supply and demand, geopolitical events, disruptions in planned supply and other market factors.

LONG-TERM CONTRACTING

We target a ratio of 40% fixed-pricing and 60% market-related pricing in our portfolio of long-term contracts. This is a balanced and flexible approach that allows us to adapt to market conditions and put a floor on our average realized price, reduce the volatility of our future earnings and cash flow, and deliver the best value to shareholders over the long term.

Over time, this strategy has allowed us to add increasingly favourable contracts to our portfolio that will enable us to participate in increases in market prices in the future.

Fixed-price contracts: are typically based on the industry long-term price indicator at the time the contract is accepted and escalated over the term of the contract.

Market-related contracts: are different from fixed-price contracts in that they may be based on either the spot price or the long-term price, and that price is as quoted at the time of delivery rather than at the time the contract is accepted. These contracts sometimes provide for small discounts, often include floor prices, and some include ceiling prices, all of which are also escalated over the term of the contract.

2015 Annual Report 15

Fuel services contracts: the majority of our fuel services contracts are at a fixed price per kgU, escalated over the term of the contract, and reflect the market at the time the contract is accepted.

CONTRACT PORTFOLIO STATUS

Currently, we are heavily committed under long-term uranium contracts through 2018, so we are being selective when considering new commitments. We have commitments to sell approximately 190 million pounds of U₃O₈ with 41 customers worldwide in our uranium segment, and commitments to sell approximately 65 million kilograms as UF₆ conversion with 33 customers worldwide in our fuel services segment.

Customers – U₃O₈:

Five largest customers account for 47% of commitments

LOGO

Customers – UF₆ conversion:

Five largest customers account for 59% of commitments

LOGO

MANAGING OUR CONTRACT COMMITMENTS

To meet our delivery commitments, we use uranium obtained:

•

from our existing production

•

through purchases under long-term agreements and in the spot market

•

from our existing inventory

We allow sales volumes to vary year-to-year depending on:

•

the level of sales commitments in our long-term contract portfolio (the annual average sales commitments over the next five years in our uranium segment is 27 million pounds, with commitment levels through 2018 higher than in 2019 and 2020)

•

our production volumes, including from the rampup of Cigar Lake and from potential increases at McArthur River/Key Lake

•

purchases under existing and/or new arrangements

•

discretionary use of inventories

•

market opportunities

16 CAMECO CORPORATION

Focusing on cost efficiency

PRODUCTION COSTS

In order to operate efficiently and cost-effectively, we manage operating costs and improve plant reliability by prudently investing in production infrastructure, new technology and business process improvements. Like all mining companies, our uranium segment is affected by the cost of inputs such as labour and fuel.

LOGO

Operating costs in our fuel services segment are mainly fixed. In 2015, labour accounted for about 51% of the total. The largest variable operating cost is for zirconium, followed by energy (natural gas and electricity), and anhydrous hydrogen fluoride.

PURCHASES AND INVENTORY COSTS

Our costs are also affected by the purchases of uranium and conversion services we make under long-term contracts and on the spot market.

To meet our delivery commitments, we make use of our mined production and inventories, and we purchase material where it is beneficial to do so. The cost of purchased material may be higher or lower than our other sources of supply, depending on market conditions. The cost of purchased material affects our cost of sales, which is determined by calculating the average of all of our sources of supply, including opening inventory, production and purchases.

FINANCIAL IMPACT

As greater certainty returns to the uranium market, based on our view that the market will transition from being supply-driven to being demand-driven, we expect uranium prices will rise to reflect the cost of bringing on new primary production to meet growing demand, which should have a positive impact on our average realized price.

In addition, as we execute our strategy to focus on tier-one production, we expect to see more stability in the unit cost of sales for our uranium segment.

2015 Annual Report 17

Sustainable development: A key part of our strategy

Social responsibility and environmental protection are top priorities for us, so much so that we have built our corporate objectives around them within our four measures of success: a safe, healthy and rewarding workplace, a clean environment, supportive communities, and outstanding financial performance. For us, sustainability isn’t an add-on for our company; it’s at the core of our company culture. It helps us:

•

build trust, credibility and corporate reputation

•

gain and enhance community support for our operations and plans

•

attract and retain employees

•

manage risk

•

drive innovation and continual improvement to build competitive advantage

Because they are so important, we integrate sustainable development principles and practices at each level of our organization, from our overall corporate strategy to individual employee practice in day-to-day operations.

SAFE, HEALTHY, REWARDING WORKPLACE

We are committed to living a strong safety culture, while looking to continually improve. As a result of this commitment, we have a long history of strong safety performance at our operations and across the organization.

2015 Highlights:

•

our total recordable injury rate decreased by 10%

•

continued low average dose of radiation to workers while moving Cigar Lake into commercial production

•

awarded the John T Ryan National Safety award for McArthur River mine based on prior year performance

•

top employer awards

A CLEAN ENVIRONMENT

We are committed to being a leading environmental performer. We strive to be a leader not only by complying with legal requirements, but also by keeping risks as low as reasonably achievable, and looking for opportunities to move beyond requirements.

We track our progress by monitoring the air, water and land near our operations, and by measuring the amount of energy we use and the amount of waste generated. We use this information to help identify opportunities to improve.

2015 Highlights:

•

sustained the significantly reduced uranium-to-air emissions achieved at our Port Hope Conversion facility in 2014

•

implemented waste management initiatives across the organization, including significant reductions of low level radioactive waste stored at our Fuel Services Division facilities

•

achieved a 50% reduction of surface water consumption at our McArthur River operation through increased recycling initiatives

•

carried out industry leading research and innovation in groundwater restoration at our US in situ recovery operations

SUPPORTIVE COMMUNITIES

Gaining the trust and support of our communities, indigenous people, and governments is necessary to sustain our business. We earn support and trust through excellent safety and environmental performance, by proactively engaging our stakeholders in an open and transparent way, and by making a difference in communities wherever we operate. These efforts are critical to obtaining and maintaining the necessary regulatory approvals.

2015 Highlights:

•

over $299 million in procurement from locally owned northern Saskatchewan companies

•

1,369 local personnel from northern Saskatchewan (811 Cameco employees, 558 contractors)

•

no significant disputes related to land use or customary rights

•

community engagement activities at all of our operations

•

established relationships with five universities along with Los Alamos National Laboratory, and the United States Geological Survey in conducting groundwater restoration

18 CAMECO CORPORATION

OUTSTANDING FINANCIAL PERFORMANCE

Long-term financial stability and profitability are essential to our sustainability as a company. We firmly believe that sound governance is the foundation for strong corporate performance.

2015 Highlights:

•

continue to achieve an average realized price that outperforms the market

•

ranked 26^th out of 234 Canadian companies by Globe and Mail in governance practices

MONITORING AND MEASUREMENT

We take the integration of sustainable development and measurement of our performance seriously. We have been producing a Sustainable Development (SD) Report since 2005, using the Global Reporting Initiative’s Sustainability Framework (GRI). It is our report card to our stakeholders. It tells them how we’re performing against globally recognized key indicators that measure our social, environmental and economic impacts in the areas that matter most to them. It provides information about our goals, where we’ve met, exceeded or struggled with them, and how we plan to do better. We expect to release our next SD Report in 2016.

All of our operating sites are ISO 14001 compliant. In addition, we have now transitioned from individual site-based ISO 14001 certifications to a single corporate certification. We expect to roll the majority of our operations into this single certification.

Achievements

We are a four-time Gold award winner through the Progressive Aboriginal Relations program as judged by the Canadian Council for Aboriginal Business. We are also proud to have been named one of Canada’s Top 100 Employers, Saskatchewan’s Top Employers, Canada’s Best Diversity Employers and one of Canada’s Top Employers for Young People for the sixth year. We are a leading employer of indigenous peoples in Canada, and have procured over $3 billion in services from local suppliers in northern Saskatchewan since 2004. This year, we were also named one of the world’s most sustainable corporations by Corporate Knights, a Canadian media and research company.

In 2015, we secured approval to increase production at the McArthur River operation as a result of earning the confidence of our regulators, which—although primarily based on our safety, health and environmental performance—is also a reflection of the support we have from our neighbouring communities in northern Saskatchewan.

We encourage you to review our SD report at cameco.com/about/sustainability which outlines our commitment to people and the environment in more detail.

2015 Annual Report 19

LOGO

20 CAMECO CORPORATION

Measuring our results

There is no finish line when it comes to delivering on our strategic goals. We have a long-term commitment to constantly measure, evaluate and improve.

Each year, we set corporate objectives that are aligned with our strategic plan. These objectives fall under our four measures of success, and performance against specific targets under these objectives forms the foundation for a portion of annual employee and executive compensation. See our most recent management proxy circular for more information on how executive compensation is determined.


2015 OBJECTIVES¹	TARGET	RESULTS

OUTSTANDING FINANCIAL PERFORMANCE

Earnings measures	Achieve targeted adjusted net earnings and cash flow from operations.	Partially achieved	• adjusted net earnings were lower than the target • cash flow from operations was higher than the target

Capital management measures	Execute capital projects within the approved scope, cost and schedule.	Achieved	• cost performance was below the target level (under budget) • project milestones were achieved on or ahead of schedule

Cigar Lake	Achieve production target at Cigar Lake.	Exceeded	• production from Cigar Lake in 2015 was higher than the target

SAFE, HEALTHY AND REWARDING WORKPLACE

Workplace safety	Strive for no injuries at all Cameco-operated sites. Maintain a long-term downward trend in combined employee and contractor injury frequency and severity, and radiation doses.	Partially achieved	• did not meet our targeted safety measures • injury rates trended downward across the company, but fell short of targets for the year • average radiation doses remained low and stable

Rewarding workplace	Attract and retain the employees needed to support operations.	Substantially achieved	• overall voluntary turnover rate was better than target (lower turnover) • turnover rate for new hires during the first year of employment was higher than the target (higher turnover)

CLEAN ENVIRONMENT

Improve environmental performance	Achieve a decreasing trend for environmental incidents.	Achieved	• there were no significant environmental incidents in 2015 • reportable environmental incidents were within the range of targeted performance

SUPPORTIVE COMMUNITIES

Build and sustain stakeholder support	Meet our business development obligations under our Collaboration Agreements.	Exceeded	• sourcing of northern services from northern Saskatchewan vendors was above the target • sourcing of capital projects construction services from northern Saskatchewan vendors was above the target

¹	Detailed results for our 2015 corporate objectives and the related targets will be provided in our 2016 management proxy circular prior to our Annual Meeting of Shareholders on May 11, 2016.

2015 Annual Report 21

2016 objectives

OUTSTANDING FINANCIAL PERFORMANCE

• Achieve targeted adjusted net earnings and cash flow from operations.

• Achieve capital project management targets and continue to ramp up production at Cigar Lake.

SAFE, HEALTHY AND REWARDING WORKPLACE

• Improve workplace safety performance at all sites.

• Attract and retain the employees needed to support operations.

CLEAN ENVIRONMENT

• Improve environmental performance at all sites.

SUPPORTIVE COMMUNITIES

• Build and sustain strong stakeholder support for our activities.

22 CAMECO CORPORATION

Financial results

This section of our MD&A discusses our performance, financial condition and outlook for the future.


24		2015 CONSOLIDATED FINANCIAL RESULTS

35		OUTLOOK FOR 2016

37		LIQUIDITY AND CAPITAL RESOURCES

42		BALANCE SHEET

43		2015 FINANCIAL RESULTS BY SEGMENT

43		URANIUM

45		FUEL SERVICES

45		NUKEM

46		FOURTH QUARTER FINANCIAL RESULTS

46		CONSOLIDATED RESULTS

48		URANIUM

50		FUEL SERVICES

50		NUKEM

2015 Annual Report 23

2015 consolidated financial results

On January 31, 2014, we announced the sale of our 31.6% limited partnership interest in BPLP and related entities for $450 million. The sale closed on March 27, 2014 and has been accounted for as being completed effective January 1, 2014.

Under IFRS, we are required to report the results from discontinued operations separately from continuing operations. We have included our operating earnings from BPLP, and the financial impact of the sale, in discontinued operations.

Throughout this document, for comparison purposes, all results for “earnings from continuing operations” and “cash from continuing operations” have been revised to exclude BPLP. The impact of BPLP is shown separately as a discontinued operation.


HIGHLIGHTS							CHANGE FROM
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED)	2015		2014		2013		2014 TO 2015
Revenue		2,754		2,398		2,439		15	%
Gross profit		697		638		607		9	%
Net earnings attributable to equity holders		65		185		318		(65	)%
$ per common share (basic)		0.16		0.47		0.81		(65	)%
$ per common share (diluted)		0.16		0.47		0.81		(65	)%
Adjusted net earnings (non-IFRS, see page 25)		344		412		445		(17	)%
$ per common share (adjusted and diluted)		0.87		1.04		1.12		(16	)%
Cash provided by operations (after working capital changes)		450		480		524		(6	)%

Net earnings

Our net earnings attributable to equity holders (net earnings) in 2015 were $65 million ($0.16 per share diluted) compared to $185 million ($0.47 per share diluted) in 2014, mainly due to:

•

greater losses on foreign exchange derivatives due to the weakening of the Canadian dollar. See Foreign exchange on page 34 for details.

•

lower tax recoveries, primarily due to the write-off of our deferred tax asset in the US. See Income taxes on page 29 for details.

partially offset by:

•

lower impairment charges ($215 million in 2015; $327 million in 2014)

•

higher earnings in our uranium and fuel services segments due to higher average realized prices

•

higher earnings in our NUKEM segment as a result of higher volumes and average realized price

•

reduction of the provision related to our CRA litigation. See Income taxes on page 29 for details.

In addition, in 2014 there were a number of one-time items that contributed to the higher net earnings in 2014 compared to 2015, including:

•

the sale of our interest in BPLP resulting in a $127 million gain in 2014

•

a favourable settlement of $66 million in 2014 with respect to a dispute regarding a long-term supply contract with a utility customer

partially offset by:

•

payment of an early agreement termination fee of $18 million as a result of the cancellation of our toll conversion agreement with Springfields Fuels Limited (SFL), and $12 million for settlement costs with respect to early redemption of our Series C debentures in 2014

•

the write-off of $41 million of assets under construction in 2014 as a result of changes made to the scope of a number of projects

THREE-YEAR TREND

Our net earnings normally trend with revenue, but, in recent years, have been significantly influenced by unusual items.

24 CAMECO CORPORATION

In 2014, our net earnings were $133 million lower than in 2013 primarily due to:

•

an increase in impairment charges ($70 million in 2013; $327 million in 2014)

•

no earnings from BPLP, which we divested in the first quarter of 2014

•

the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects

•

payment of an early termination fee of $18 million incurred as a result of our toll conversion agreement with SFL, and settlement costs of $12 million with respect to early termination of our Series C debentures

•

lower earnings from our fuel services business as a result of a decrease in sales volumes and higher unit cost of sales

•

higher losses on foreign exchange derivatives due to the weakening Canadian dollar. See Foreign exchange on page 34 for more information.

partially offset by:

•

a $127 million gain on the sale of our interest in BPLP in 2014

•

higher earnings from our uranium segment due to a higher average realized price

•

a favourable settlement of $66 million in a dispute regarding a long-term supply contract with a utility customer

•

lower exploration costs

•

higher tax recoveries resulting from higher pre-tax losses in Canada

Impairment charge on producing assets

During the fourth quarter of 2015, we recognized a $210 million impairment charge related to our Rabbit Lake operation. The impairment was due to increased uncertainty around future production sources for the Rabbit Lake mill as a result of the ongoing economic conditions. The amount of the charge was determined as the excess of carrying value over the recoverable amount. The recoverable amount of the mill was determined to be $69 million. See note 9 to the financial statements.

Non-IFRS measures

ADJUSTED NET EARNINGS

Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a more meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period, and adjusted for impairment charges, the write-off of assets, NUKEM inventory write-down, loss on exploration properties, gain on interest in BPLP (after tax), and income taxes on adjustments.

Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the years ended 2015, 2014 and 2013.


($ MILLIONS)	2015			2014			2013
Net earnings attributable to equity holders		65			185			318

Adjustments
Adjustments on derivatives (pre-tax)		166			47			56
NUKEM purchase price inventory recovery		(3	)		(5	)		14
Impairment charges		215			327			70
Income taxes on adjustments		(99	)		(56	)		(28	)
Write-off of assets		—			41			—
Loss on exploration properties		—			—			15
Gain on interest in BPLP (after tax)		—			(127	)		—

Adjusted net earnings		344			412			445

2015 Annual Report 25

The following table shows what contributed to the change in adjusted net earnings for 2015.


($ MILLIONS)
Adjusted net earnings – 2014		412

Change in gross profit by segment
(we calculate gross profit by deducting from revenue the cost of products and services sold, and depreciation and amortization (D&A), net of hedging benefits)

Uranium	Lower sales volume	(27	)
	Lower realized prices ($US)	(76	)
	Foreign exchange impact on realized prices	245
	Higher costs	(136	)

	change – uranium	6

Fuel services	Lower sales volume	(5	)
	Higher realized prices ($Cdn)	50
	Higher costs	(22	)

	change – fuel services	23

NUKEM	Gross profit	20

	change – NUKEM	20

Other changes
Higher administration expenditures		(10	)
Lower exploration expenditures		6
Lower income tax recovery		(76	)
Contract termination fee (SFL) incurred in 2014		18
Arbitration award in 2014		(66	)
Debenture redemption premium incurred in 2014		12
Lower loss on disposal of assets		1
Higher loss on derivatives		(40	)
Lower loss on equity-accounted investments		16
Higher foreign exchange gains		25
Other		(3	)

Adjusted net earnings – 2015		344

THREE-YEAR TREND

Our adjusted net earnings decreased from 2013 to 2014, and decreased again from 2014 to 2015.

The 7% decrease from 2013 to 2014 resulted from:

•

no earnings from BPLP due to divestiture of our interest in the first quarter of 2014

•

an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL, which was to expire in 2016

•

settlement costs of $12 million with respect to the early redemption of our Series C debentures

•

lower earnings from our fuel services business as a result of lower sales volumes and higher unit cost of sales

•

greater losses on foreign exchange derivatives due to the weakening of the Canadian dollar

partially offset by:

•

higher earnings in our uranium segment due to a higher average realized price

•

a favourable settlement of $66 million with respect to a dispute regarding a long-term supply contract with a utility customer

•

lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly at our Kintyre project in Australia and at Inkai

The 17% decrease from 2014 to 2015 resulted from:

•

greater losses on foreign exchange derivatives due to the weakening of the Canadian dollar, see Foreign exchange on page 34 for more information

•

lower tax recoveries, primarily due to the write-off of our deferred tax asset in the US. See Income taxes on page 29 for details.

26 CAMECO CORPORATION

partially offset by:

•

higher earnings in our uranium and fuel services segments mainly due to a higher average realized price

•

higher earnings from our NUKEM segment mainly due to higher sales volumes and a higher average realized price

•

a reduction of the provision related to our CRA litigation, see Income taxes on page 29 for details

In addition, in 2014 there was a favourable settlement of $66 million with respect to a dispute regarding a long-term supply contract with a utility customer that contributed to the higher adjusted net earnings in 2014 compared to 2015. The impact of the settlement was partially offset by an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL and settlement costs of $12 million with respect to the early redemption of our Series C debentures in 2014.

Average realized prices



								CHANGE FROM
		2015		2014		2013		2014 TO 2015
Uranium¹	$US/lb		45.19		47.53		48.35		(5	)%
	$Cdn/lb		57.58		52.37		49.81		10	%
Fuel services	$Cdn/kgU		23.37		19.70		18.12		19	%
NUKEM	$Cdn/lb		48.82		44.90		42.26		9	%

¹	Average realized foreign exchange rate ($US/$Cdn): 2015 – $1.27, 2014 – $1.10 and 2013 – $1.03.

Revenue

The following table shows what contributed to the change in revenue for 2015.


($ MILLIONS)
Revenue – 2014	2,398
Uranium
Lower sales volume	(80	)
Higher realized prices ($Cdn)	169
Change in intersegment sales	48

Fuel services
Lower sales volume	(37	)
Higher realized prices ($Cdn)	50
Change in intersegment sales	4

NUKEM
Change in revenue	204
Change in intersegment sales	23

Other	(25	)

Revenue – 2015	2,754

See 2015 Financial results by segment on page 43 for more detailed discussion.

THREE-YEAR TREND

In 2014, revenue decreased by 2% compared to 2013 due to lower sales revenues in our NUKEM and fuel services segments as we reduced sales volumes in response to market conditions. This was partially offset by higher revenues in our uranium business due to a higher average realized price for uranium resulting from the weakening of the Canadian dollar compared to 2013. The realized foreign exchange rate was 1.10 compared to 1.03 in 2013.

In the third quarter of 2015, we projected our annual revenue to increase between 5% and 10%, but realized a 15% increase over 2014. One contributing factor was higher revenue in our NUKEM segment as a result of higher than expected sales volumes, which were driven by increased market activity in the fourth quarter. In addition, sales revenues in all of our operating segments increased compared to 2014 due to higher realized prices resulting from the weakening of the Canadian dollar. The realized foreign exchange rate was 1.27 compared to 1.10 in 2014.

2015 Annual Report 27

OUTLOOK FOR 2016

We expect consolidated revenue to decrease up to 5% in 2016, based on currently committed sales volumes, due to a planned decrease in uranium and fuel services sales volumes. If we make additional sales with deliveries in 2016, we would expect our revenue outlook to increase.

In our uranium and fuel services segments, our customers choose when in the year to receive deliveries. As a result, our quarterly delivery patterns and, therefore, our sales volumes and revenue can vary significantly as shown below. We expect the quarterly distribution of uranium deliveries in 2016 to be weighted to the second half of the year. However, not all delivery notices have been received to date and the expected delivery pattern could change. Typically, we receive notices six months in advance of the requested delivery date.

LOGO

Discontinued operation

On March 27, 2014, we completed the sale of our 31.6% limited partnership interest in BPLP, which was accounted for effective January 1, 2014. The aggregate sale price for our interest in BPLP and certain related entities was $450 million. We realized an after tax gain of $127 million on this divestiture. As a result of the transaction, we presented the results of BPLP as a discontinued operation and we revised our statement of earnings, statement of comprehensive income and statement of cash flows to reflect the change in presentation. See note 6 to the financial statements for more information.


($ MILLIONS)	2015		2014
Share of earnings from BPLP and related entities		—		—
Tax expense		—		—

		—		—
Gain on disposal of BPLP and related entities		—		145
Tax expense on disposal		—		(18	)

		—		127

Net earnings from discontinued operations		—		127

Corporate expenses

ADMINISTRATION


($ MILLIONS)	2015		2014		CHANGE
Direct administration		173		163		6	%
Stock-based compensation		14		13		8	%

Total administration		187		176		6	%

Direct administration costs in 2015 were $10 million higher than in 2014 due to costs related to our collaboration agreement with the startup of Cigar Lake, increased legal costs as our CRA dispute progresses toward trial, and the effect of foreign exchange on our US subsidiaries.

28 CAMECO CORPORATION

We recorded $14 million in stock-based compensation expenses this year under our stock option, restricted share unit, deferred share unit, performance share unit and phantom stock option plans, compared to $13 million in 2014. See note 25 to the financial statements.

Outlook for 2016

We expect administration costs (not including stock-based compensation) to be 5% to 10% higher compared to 2015 due to increased costs related to the northern collaboration agreements and increased project work. In 2016, we are continuing to negotiate new collaboration agreements with northern communities, which could result in additional one-time payments. Due to the uncertainty of the timing for the potential signing of agreements, the cost is not included in our outlook. If agreements are signed and there is an impact on our administrative costs, we will update our outlook.

EXPLORATION

Our 2015 exploration activities remained focused on Canada and Australia. As we continued to focus more on our core projects in Saskatchewan, and reduced our activities elsewhere, we decreased our spending from $47 million in 2014 to $40 million in 2015.

Outlook for 2016

We expect exploration expenses to be about 15% to 20% higher than they were in 2015 due to increased exploration activity at Cigar Lake.

FINANCE COSTS

Finance costs were $104 million compared to $112 million in 2014. The decrease from last year was a result of $12 million in settlement costs related to the early redemption of our Series C debentures being incurred in 2014, partially offset by higher interest on long-term debt in 2015. See note 20 to the financial statements.

FINANCE INCOME

Finance income was $5 million compared to $7 million in 2014, reflecting lower average cash balances in 2015.

GAINS AND LOSSES ON DERIVATIVES

In 2015, we recorded $281 million in losses on our derivatives compared to losses of $121 million in 2014. The increase reflects the continued weakening of the Canadian dollar compared to the US dollar in 2015. See Foreign exchange on page 34 and note 27 to the financial statements.

INCOME TAXES

We recorded an income tax recovery of $143 million in 2015 compared to a recovery of $175 million in 2014. The decrease in recovery was primarily due to the write-off of our deferred tax asset in the US, partially offset by a reduction in the provision related to our CRA litigation and a change in the distribution of earnings between jurisdictions compared to 2014. See note 22 to the financial statements.

During the fourth quarter, we reversed amounts related to our deferred tax asset in the US totaling $73 million. We determined that it was no longer probable that there would be sufficient taxable profit in the future against which the operating losses and other tax deductions could be used.

The recovery was impacted by a decrease of $42 million to our provision related to the CRA litigation. Since 2008, CRA has disputed our corporate structure and the related transfer pricing methodology we used for certain intercompany uranium sale and purchase agreements, and issued notices of reassessment for our 2003 through 2010 tax returns. We have recorded a cumulative tax provision of $50 million (September 30, 2015 - $92 million), where an argument could be made that our transfer price may have fallen outside of an appropriate range of pricing in uranium contracts for the period from 2003 through 2015. We have reduced the provision to reflect management’s revised estimate, which takes into account additional contract information. We are confident that we will be successful in our case and continue to believe the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution. See note 22 to the financial statements.

2015 Annual Report 29

In 2015, we recorded losses of $960 million in Canada compared to $841 million in 2014, while earnings in foreign jurisdictions increased to $880 million from $722 million. The tax rate in Canada is higher than the average of the rates in the foreign jurisdictions in which our subsidiaries operate.

In the third quarter, we expected our annual income tax rate, based on adjusted net earnings, to be a recovery of 25% to 30%. The actual result was a recovery of 15%, mainly due to one-time adjustments as discussed above. On an adjusted earnings basis, we recognized a tax recovery of $44 million in 2015 compared to a recovery of $120 million in 2014. Our effective tax rate was a recovery of 15% in 2015, compared to a recovery of 41% in 2014. The table below presents our adjusted earnings and adjusted income tax expenses attributable to Canadian and foreign jurisdictions.


($ MILLIONS)	2015			2014
Pre-tax adjusted earnings¹
Canada		(578	)		(611	)
Foreign		877			901

Total pre-tax adjusted earnings		299			290

Adjusted income taxes¹
Canada		(177	)		(156	)
Foreign		133			36

Adjusted income tax recovery		(44	)		(120	)

¹	Pre-tax adjusted earnings and adjusted income taxes are non-IFRS measures. Our IFRS-based measures have been adjusted by the amounts reflected in the table in adjusted net earnings (non-IFRS measure on page 25).

TRANSFER PRICING DISPUTES

We have been reporting on our transfer pricing disputes with CRA since 2008, when it originated, and with the United States Internal Revenue Service (IRS) since the first quarter of 2015. Below, we discuss the general nature of transfer pricing disputes and, more specifically, the ongoing disputes we have.

Transfer pricing is a complex area of tax law, and it is difficult to predict the outcome of cases like ours. However, tax authorities generally test two things:

•

the governance (structure) of the corporate entities involved in the transactions

•

the price at which goods and services are sold by one member of a corporate group to another

We have a global customer base and we established a marketing and trading structure involving foreign subsidiaries, including Cameco Europe Limited (CEL), which entered into various intercompany arrangements, including purchase and sale agreements, as well as uranium purchase and sale agreements with third parties. Cameco and its subsidiaries made reasonable efforts to put arm’s-length transfer pricing arrangements in place, and these arrangements expose the parties to the risks and rewards accruing to them under these contracts. The intercompany contract prices are generally comparable to those established in comparable contracts between arm’s-length parties entered into at that time.

For the years 2003 to 2010, CRA has shifted CEL’s income (as recalculated by CRA) back to Canada and applied statutory tax rates, interest and instalment penalties, and, from 2007 to 2009, transfer pricing penalties. There has not yet been a decision regarding a transfer pricing penalty for 2010. The IRS is also proposing to allocate a portion of CEL’s income for the years 2009 through 2012 to the US, resulting in such income being taxed in multiple jurisdictions. Taxes of approximately $320 million for the 2003 – 2015 years have already been paid in a jurisdiction outside Canada and the US. Bilateral international tax treaties contain provisions that generally seek to prevent taxation of the same income in both countries. As such, in connection with these disputes, we are considering our options, including remedies under international tax treaties that would limit double taxation; however, there is a risk that we will not be successful in eliminating all potential double taxation. The expected income adjustments under our tax disputes are represented by the amounts claimed by CRA and IRS and are described below.

30 CAMECO CORPORATION

CRA dispute

Since 2008, CRA has disputed our corporate structure and the related transfer pricing methodology we used for certain intercompany uranium sale and purchase agreements. To the end of 2014, we received notices of reassessment for our 2003 through 2009 tax returns, and, in the fourth quarter of 2015, we received a notice of reassessment for our 2010 tax year. We have recorded a cumulative tax provision of $50 million (September 30, 2015 - $92 million), where an argument could be made that our transfer price may have fallen outside of an appropriate range of pricing in uranium contracts for the period from 2003 through 2015. We have reduced the provision to reflect management’s revised estimate, which takes into account additional contract information. We are confident that we will be successful in our case and continue to believe the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution.

For the years 2003 through 2010, CRA issued notices of reassessment for approximately $3.4 billion of additional income for Canadian tax purposes, which would result in a related tax expense of about $1.1 billion. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2009 in the amount of $229 million. The Canadian income tax rules include provisions that require larger companies like us to remit or otherwise secure 50% of the cash tax plus related interest and penalties at the time of reassessment. To date, under these provisions, after applying elective deductions, we have paid a net amount of $232 million cash. In addition, we have provided $332 million in letters of credit (LC) to secure 50% of the cash taxes and related interest amounts reassessed in 2015. The amounts paid or secured are shown in the table below.


YEAR PAID ($ MILLIONS)	CASH TAXES		INTEREST AND INSTALMENT PENALTIES		TRANSFER PRICING PENALTIES		TOTAL		CASH REMITTANCE		SECURED BY LC
Prior to 2013		—		13		—		13		13		—
2013		1		9		36		46		46		—
2014		106		47		—		153		153		—
2015		202		71		79		352		20		332

Total		309		140		115		564		232		332

Using the methodology we believe CRA will continue to apply, and including the $3.4 billion already reassessed, we expect to receive notices of reassessment for a total of approximately $7.0 billion of additional income taxable in Canada for the years 2003 through 2015, which would result in a related tax expense of approximately $2.1 billion. As well, CRA may continue to apply transfer pricing penalties to taxation years subsequent to 2009. As a result, we estimate that cash taxes and transfer pricing penalties for these years would be between $1.65 billion and $1.70 billion. In addition, we estimate there would be interest and instalment penalties applied that would be material to us. While in dispute, we would be responsible for remitting or otherwise providing security for 50% of the cash taxes and transfer pricing penalties (between $825 million and $850 million), plus related interest and instalment penalties assessed, which would be material to us.

Under the Canadian federal and provincial tax rules, the amount required to be paid or secured each year will depend on the amount of income reassessed in that year and the availability of elective deductions and tax loss carryovers. Recently, the CRA decided to disallow the use of any loss carry-backs for any transfer pricing adjustment, starting with the 2008 tax year. This does not impact the anticipated income tax expense for a particular year, but does impact the timing of any required security or payment. As noted above, for the 2010 tax year, as an alternative to paying cash, we used letters of credit to satisfy our obligations related to the reassessed income tax and related interest amounts. We expect to be able to continue to provide security in the form of letters of credit to satisfy these requirements. The estimated amounts summarized in the table below reflect actual amounts paid or secured and estimated future amounts owing based on the actual and expected reassessments for the years 2003 through 2015, and include the expected timing adjustment for the inability to use any loss carry-backs starting in 2008. We will update this table annually to include the estimated impact of reassessments expected for completed years subsequent to 2015.

2015 Annual Report 31


$ MILLIONS	2003-2015		2016-2017		2018-2023		TOTAL
50% of cash taxes and transfer pricing penalties paid, secured or owing in the period
Cash payments		156		155 - 180		30 - 55		335 - 360
Secured by letters of credit		264		95 - 120		20 - 45		425 - 450

Total paid¹		420		255 - 280		65 - 90		825 - 850

¹	These amounts do not include interest and instalment penalties, which totaled approximately $140 million to December 31, 2015.

In light of our view of the likely outcome of the case as described above, we expect to recover the amounts remitted, including the $564 million already paid or otherwise secured to date.

We are expecting the trial for the 2003, 2005 and 2006 reassessments to commence during the week of September 26, 2016, with final arguments in April 2017. If this timing is adhered to, we expect to receive a Tax Court decision within six to 18 months after the trial is complete.

IRS dispute

In the fourth quarter of 2015, we received a Revenue Agents Report (RAR) from the IRS for the tax years 2010 to 2012. Similar to the 2009 RAR received in the first quarter of 2015, the IRS is challenging the transfer pricing used under certain intercompany transactions pertaining to the 2010 to 2012 tax years for certain of our US subsidiaries. The 2009 and 2010 to 2012 RARs list the adjustments proposed by the IRS and calculate the tax and any penalties owing based on the proposed adjustments.

The current position of the IRS is that a portion of the non-US income reported under our corporate structure and taxed in non-US jurisdictions should be recognized and taxed in the US on the basis that:

•

the prices received by our US mining subsidiaries for the sale of uranium to CEL are too low

•

the compensation earned by Cameco Inc., one of our US subsidiaries, is inadequate

The proposed adjustments result in an increase in taxable income in the US of approximately $419 million (US) and a corresponding increased income tax expense of approximately $122 million (US) for the 2009 through 2012 taxation years, with interest being charged thereon. In addition, the IRS proposed cumulative penalties of approximately $8 million (US) in respect of the adjustment.

We believe that the conclusions of the IRS in the RARs are incorrect and we are contesting them in an administrative appeal, during which we are not required to make any cash payments. Until this matter progresses further, we cannot provide an estimation of the likely timeline for a resolution of the dispute.

We believe that the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution.

Overview of disputes

The table below provides an overview of some of the key points with respect to our CRA and IRS tax disputes.


	CRA	IRS
Basis for dispute	• Corporate structure/governance • Transfer pricing methodology used for certain intercompany uranium sale and purchase agreements • Allocates Cameco Europe Ltd. (CEL) income (as adjusted) for 2003 through 2010 to Canada (same income we paid tax on in foreign jurisdictions and includes income that IRS is proposing to tax)	• Income earned on sales of uranium by the US mines to CEL is inadequate • Compensation earned by Cameco Inc., one of our US subsidiaries, is inadequate • Allocates a portion of CEL’s income for the years 2009 through 2012 to the US (a portion of the same income we paid tax on in foreign jurisdictions and which the CRA is proposing to tax)

Years under consideration	• CRA reassessed 2003 to 2010 • Auditing 2011 to 2012	• IRS has proposed adjustments for 2009 through 2012

32 CAMECO CORPORATION


Timing of resolution	• Expect our appeal of the 2003, 2005 and 2006 reassessments to commence during the week of September 26, 2016, with final arguments expected in April 2017 • Expect Tax Court decision six to 18 months after completion of trial	• Contesting proposed adjustments in an administrative appeal • We cannot yet provide an estimate as to the timeline for resolution

Required payments	• Expect to provide security in form of letters of credit and/or make cash payments for 50% of cash taxes, interest and penalties as reassessed • Paid $232 million in cash to date • Secured $332 million using letters of credit	• No security or cash payments required while under administrative appeal

Caution about forward-looking information relating to our CRA and IRS tax dispute

This discussion of our expectations relating to our tax disputes with CRA and IRS and future tax reassessments by CRA and IRS is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2 and also on the more specific assumptions and risks listed below. Actual outcomes may vary significantly.

Assumptions

•

CRA will reassess us for the years 2011 through 2015 using a similar methodology as for the years 2003 through 2010, and the reassessments will be issued on the basis we expect

•

we will be able to apply elective deductions and utilize letters of credit to the extent anticipated

•

CRA will seek to impose transfer pricing penalties (in a manner consistent with penalties charged in the years 2007 through 2009) in addition to interest charges and instalment penalties

•

we will be substantially successful in our dispute with CRA and the cumulative tax provision of $50 million to date will be adequate to satisfy any tax liability resulting from the outcome of the dispute to date

•

IRS may propose adjustments for later years subsequent to 2012

•

we will be substantially successful in our dispute with IRS

Material risks that could cause actual results to differ materially

•

CRA reassesses us for years 2011 through 2015 using a different methodology than for years 2003 through 2010, or we are unable to utilize elective deductions or letters of credit to the extent anticipated, resulting in the required cash payments or security provided to CRA pending the outcome of the dispute being higher than expected

•

the time lag for the reassessments for each year is different than we currently expect

•

we are unsuccessful and the outcomes of our dispute with CRA and/or IRS result in significantly higher cash taxes, interest charges and penalties than the amount of our cumulative tax provision, which could have a material adverse effect on our liquidity, financial position, results of operations and cash flows

•

cash tax payable increases due to unanticipated adjustments by CRA or IRS not related to transfer pricing

•

IRS proposes adjustments for years 2013 through 2015 using a different methodology than for 2009 through 2012

•

we are unable to effectively eliminate all double taxation

OUTLOOK FOR 2016

On an adjusted net earnings basis, we expect a tax recovery of 25% to 30% in 2016 from our uranium, fuel services and NUKEM segments.

Our consolidated tax rate is a blend of the statutory rates applicable to taxable income earned or tax losses incurred in Canada and in our foreign subsidiaries. We have a global customer base and we have established a marketing and trading structure involving foreign subsidiaries, which entered into various intercompany purchase and sale arrangements, as well as uranium purchase and sale agreements with third parties. Cameco and its subsidiaries made reasonable efforts to put arm’s-length transfer pricing arrangements in place, and these arrangements expose the parties to the risks and rewards accruing to them under these contracts. The intercompany contract prices are generally comparable to those established in comparable contracts between arm’s-length parties entered into at that time.

This year, many of the existing intercompany purchase and sale arrangements in our portfolio expire. We have started to replace these contracts and will continue to put new intercompany arrangements in place, which, as the existing arrangements did, will reflect the market at the time they are signed.

2015 Annual Report 33

As a result, in 2017, we expect our consolidated tax rate will transition to a modest expense, and trend toward a tax expense of approximately 20% over the next five years. The actual effective tax rate will vary from year-to-year, primarily due to the actual distribution of earnings among jurisdictions and the market conditions at the time transactions occur under both our intercompany and third-party purchase and sale arrangements.

FOREIGN EXCHANGE

The exchange rate between the Canadian dollar and US dollar affects the financial results of our uranium and fuel services segments.

We sell the majority of our uranium and fuel services products under long-term contracts, which are routinely denominated in US dollars, while our production costs are largely denominated in Canadian dollars. To provide cash flow predictability and certainty as we undertake our operating and capital expenditures, we use hedging to try to protect our net exposure (e.g. total sales less US dollar expenses and product purchases) against shorter term exchange rate volatility.

Our risk management policy permits us to hedge 35% to 100% of our expected net exposure over a rolling 60-month period. Our normal practice is to hedge over a three- to four-year period by hedging 50% to 80% of net exposure in the first 12 months with decreasing hedge ratios in subsequent years. The actual hedge position is reflected in Revenue, cash flow and earnings sensitivity analysis provided on page 35.

In the reporting period, some hedge contracts may be settled and the remaining contracts outstanding, we mark-to-market, which can result in reported gains or losses on derivatives for the period depending on the movement in the US/Cdn exchange rate. In periods of rapid currency fluctuations, the average exchange rate under our hedge contracts will lag the market. For example, the average US/Cdn exchange rate for our 2015 hedge position included exchange rates for periods prior to the rapid devaluation of the Canadian dollar and was much lower than the average exchange rate for 2015. As a result, as a Canadian dollar reporter, we reported significant losses on derivatives in 2015. However, over time and as we add hedges at current market rates, we expect to realize the benefit of the weak Canadian dollar as the average exchange rate under our hedge contracts increases. In the event of a rapidly appreciating Canadian dollar, we would see the opposite effect.

Since we use hedging to protect our foreign exchange exposure in a particular period, when we put contracts in place we designate them for use in that period. Therefore, a portion of the reported gains and losses noted above do not apply in the current period. We take this into account in our adjusted net earnings measure, with the goal of better matching the benefits of our hedging activities with the expected foreign currency exposure to which they apply. In our adjusted net earnings measure, we adjust net earnings in the reporting period for one-time items that are not representative of our ongoing operations and to:

•

remove mark-to-market gains or losses on the outstanding hedge position at the end of the period

•

remove the portion of gains and losses on those contracts that were rolled over in the reporting period for use in a future period

•

add back gains and losses previously removed and that apply to the current period

At December 31, 2015:

•

The value of the US dollar relative to the Canadian dollar was $1.00 (US) for $1.38 (Cdn), up from $1.00 (US) for $1.16 (Cdn) at December 31, 2014. The exchange rate averaged $1.00 (US) for $1.28 (Cdn) over the year.

•

We had foreign currency forward contracts of $1.0 billion (US), EUR 12 million and foreign currency options of $250 million (US) at December 31, 2015. The US currency forward contracts had an average exchange rate of $1.00 (US) for $1.23 (Cdn) and US currency option contracts had an average exchange rate range of $1.00 (US) for $1.28 to $1.34 (Cdn), and €1.00 for $1.11 (US) for EUR currency contracts.

•

The mark-to-market loss on all foreign exchange contracts was $167 million compared to a $67 million loss at December 31, 2014.

We manage counterparty risk associated with hedging by dealing with highly rated counterparties and limiting our exposure. At December 31, 2015, with the exception of the EUR hedge, all of our counterparties to foreign exchange hedging contracts had a Standard & Poor’s (S&P) credit rating of A or better.

34 CAMECO CORPORATION

Outlook for 2016

Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals, while maintaining the ability to respond to conditions as they evolve.

Our outlook for 2016 reflects the expenditures necessary to help us achieve our strategy. We do not provide an outlook for the items in the table that are marked with a dash.

See 2015 Financial results by segment on page 43 for details.

2016 FINANCIAL OUTLOOK

CONSOLIDATED

URANIUM

FUEL SERVICES

NUKEM

Production

—

30.0

million lbs

8 to 9

million kgU

—

Delivery volume¹

—

30 to 32

million lbs

Decrease

up to 5%

9 to 10

million lbs U₃O₈

Revenue compared to 2015³

Decrease

up to 5%

Decrease

up to 5%

⁴

Increase

up to 5%

Increase

5% to 10%

Average unit cost of sales (including D&A)

—

Increase

up to 5%

⁵

Increase

10% to 15%

—

Direct administration costs compared to 2015⁶

Increase

5% to 10%

—

Gross profit

—

Gross profit

4% to 5%

Exploration costs compared to 2015

—

Increase

15% to 20%

—

Tax rate⁷

Recovery of

25% to 30%

—

Capital expenditures

320 million

—

¹	Our 2016 outlook for delivery volume in our uranium and NUKEM segments does not include sales between our uranium, fuel services and NUKEM segments.

²	Our uranium delivery volume is based on the volumes we currently have commitments to deliver under contract in 2016.

³	For comparison of our 2016 outlook and 2015 results for revenue in our uranium and NUKEM segments, we do not include sales between our uranium, fuel services and NUKEM segments.

⁴	Based on a uranium spot price of $34.65 (US) per pound (the Ux spot price as of February 1, 2016), a long-term price indicator of $44.00 (US) per pound (the Ux long-term indicator on January 25, 2016) and an exchange rate of $1.00 (US) for $1.25 (Cdn).

⁵	This increase is based on the unit cost of sales for produced material and committed long-term purchases. If we make discretionary purchases in 2016, then we expect the overall unit cost of sales may be affected.

⁶	Direct administration costs do not include stock-based compensation expenses. See page 28 for more information.

⁷	Our outlook for the tax rate is based on adjusted net earnings.

REVENUE, CASH FLOW AND EARNINGS SENSITIVITY ANALYSIS

For 2016:

•

An increase of $5 (US) per pound in each of the Ux spot price ($34.65 (US) per pound on February 1, 2016) and the Ux long-term price indicator ($44.00 (US) per pound on January 25, 2016) would change revenue by $72 million and net earnings by $56 million. Conversely, a decrease of $5 (US) per pound would decrease revenue by $69 million and net earnings by $54 million.

•

A one cent change in the value of the Canadian dollar versus the US dollar would change adjusted net earnings by $8 million and cash flow by $1 million, with a decrease in the value of the Canadian dollar versus the US dollar having a positive impact.

PRICE SENSITIVITY ANALYSIS: URANIUM SEGMENT

The following table and graph are not forecasts of prices we expect to receive. The prices we actually realize will be different from the prices shown in the table and graph. They are designed to indicate how the portfolio of long-term contracts we had in place on December 31, 2015 would respond to different spot prices. In other words, we would realize these prices only if the contract portfolio remained the same as it was on December 31, 2015, and none of the assumptions we list below change.

We intend to update this table and graph each quarter in our MD&A to reflect deliveries made and changes to our contract portfolio. As a result, we expect the table and graph to change from quarter to quarter.

2015 Annual Report 35

Expected realized uranium price sensitivity under various spot price assumptions

(rounded to the nearest $1.00)


SPOT PRICES ($US/lb U₃O₈)	$20		$40		$60		$80		$100		$120		$140
2016		41		46		56		65		75		84		93
2017		39		46		56		67		78		87		94
2018		39		47		58		69		80		90		97
2019		39		47		59		70		79		88		94
2020		42		49		59		70		79		86		93

LOGO

The table and graph illustrate the mix of long-term contracts in our December 31, 2015 portfolio, and are consistent with our marketing strategy. Both have been updated to reflect deliveries made and contracts entered into up to December 31, 2015.

Our portfolio includes a mix of fixed-price and market-related contracts, which we target at a 40:60 ratio. Those that are fixed at lower prices or have low ceiling prices will yield prices that are lower than current market prices.

Our portfolio is affected by more than just the spot price. We made the following assumptions (which are not forecasts) to create the table:

Sales

•

sales volumes on average of 27 million pounds per year, with commitment levels in 2016 through 2018 higher than in 2019 and 2020

•

excludes sales between our uranium, fuel services and NUKEM segments

Deliveries

•

deliveries include best estimates of requirements contracts and contracts with volume flex provisions

Annual inflation

•

is 2% in the US

Prices

•

the average long-term price indicator is the same as the average spot price for the entire year (a simplified approach for this purpose only). Since 1996, the long-term price indicator has averaged 19% higher than the spot price. This differential has varied significantly. Assuming the long-term price is at a premium to spot, the prices in the table and graph will be higher.

36 CAMECO CORPORATION

Liquidity and capital resources

At the end of 2015, we had cash and short-term investments of $459 million in a mix of short-term deposits and treasury bills, while our total debt amounted to $1.5 billion.

We have large, creditworthy customers that continue to need uranium even during weak economic conditions, and we expect the uranium contract portfolio we have built to provide a solid revenue stream for years to come.

We expect to continue investing in maintaining and prudently expanding our production capacity over the next several years. We have a number of alternatives to fund future capital requirements, including using our current cash balances, drawing on our existing credit facilities, entering new credit facilities, using our operating cash flow, and raising additional capital through debt or equity financings. We are always considering our financing options so we can take advantage of favourable market conditions when they arise. Due to the cyclical nature of our business, we may need to temporarily draw on other short-term liquidity during the course of the year. However, apart from these short-term fluctuations, we expect our cash balances and operating cash flows will meet our capital requirements during 2016, without the need for significant additional funding.

We have an ongoing dispute with CRA, see page 30 for more information. Until this dispute is settled, we expect to pay cash or provide security in the form of letters of credit for future amounts owing to the Government of Canada for 50% of the cash taxes payable and the related interest and penalties. We have provided an estimate of the amount and timing of the expected cash taxes and transfer pricing penalties paid, secured or owing in the table on page 32.

FINANCIAL CONDITION


	2015			2014
Cash position ($ millions)		459			567
(cash and cash equivalents)
Cash provided by continuing operations ($ millions)		450			480
(net cash flow generated by our operating activities after changes in working capital)
Cash provided by operations/net debt		44	%		52	%
(net debt is total consolidated debt, less cash position)
Net debt/total capitalization		16	%		15	%
(total capitalization is net debt and equity)

CREDIT RATINGS

The credit ratings assigned to our securities by external ratings agencies are important to our ability to raise capital at competitive pricing to support our business operations. Our investment grade credit ratings reflect the current financial strength of our company.

Third-party ratings for our commercial paper and senior debt as of December 31, 2015:


SECURITY	DBRS		S&P
Commercial paper		R-1 (low)		A-1 (low)	¹
Senior unsecured debentures		A (low)		BBB+
Rating trend / rating outlook		Negative		Stable

¹	Canadian National Scale Rating. The Global Scale Rating is A-2.

DBRS provides guidance for the outlook of the assigned rating using the rating trend. The rating trend represents their assessment of the likelihood and direction that the rating could change in the future, should present tendencies continue, or in some cases, if challenges are not overcome.

S&P uses rating outlooks to assess the potential direction of a long-term credit rating over the intermediate term. Their outlook indicates the likelihood that the rating could change in the future.

The rating agencies may revise or withdraw these ratings if they believe circumstances warrant. A change in our credit ratings could affect our cost of funding and our access to capital through the capital markets.

2015 Annual Report 37

Liquidity


($ MILLIONS)	2015			2014
Cash and cash equivalents at beginning of year		567			188

Cash from operations		450			480

Investment activities
Additions to property, plant and equipment and acquisitions		(359	)		(480	)
Discontinued operation		—			447
Other investing activities		18			12

Financing activities
Change in debt		—			146
Interest paid		(70	)		(78	)

Contributions from non-controlling interest		—			1

Issue of shares		—			6

Dividends		(158	)		(158	)

Exchange rate on changes on foreign currency cash balances		11			3

Cash and cash equivalents at end of year		459			567

CASH FROM CONTINUING OPERATIONS

Cash from continuing operations was 6% lower than in 2014. This was primarily due to the settlement and rollover of contracts in our hedge portfolio which required more cash during 2015 compared to 2014, largely due to the weakening Canadian dollar, offset by higher profits in all of our segments. Not including working capital requirements, our operating cash flows in the year were down $46 million. See note 24 to the financial statements.

INVESTING ACTIVITIES

Cash used in investing includes acquisitions and capital spending.

Capital spending

We classify capital spending as sustaining, capacity replacement or growth. As a mining company, sustaining capital is the money we spend to keep our facilities running in their present state, which would follow a gradually decreasing production curve, while capacity replacement capital is spent to maintain current production levels at those operations. Growth capital is money we invest to generate incremental production, and for business development.

38 CAMECO CORPORATION


CAMECO’S SHARE ($ MILLIONS)	2015 PLAN¹			2015 ACTUAL		2016 PLAN
Sustaining capital
McArthur River/Key Lake		20			16		30
Cigar Lake		10			9		25
Rabbit Lake		35			33		25
US ISR		5			7		5
Inkai		5			1		5
Fuel services		15			13		20
Other		5			5		5

Total sustaining capital		95			84		115

Capacity replacement capital
McArthur River/Key Lake		95			96		55
Cigar Lake		25			26		20
Rabbit Lake		—			—		10
US ISR		30			27		20
Inkai		15			19		15

Total capacity replacement capital		165			168		120

Growth capital
McArthur River/Key Lake		15			13		40
Cigar Lake		90			81		30
Inkai		15			11		10
Fuel services		5			1		5
Other		—			1		—

Total growth capital		125			107		85

Total uranium & fuel services		385	¹		359		320

¹	Capital spending outlook was updated to $385 million in our third quarter MD&A.

Outlook for investing activities


CAMECO’S SHARE ($ MILLIONS)	2017 PLAN		2018 PLAN
Total uranium & fuel services		300-350		250-300

Sustaining capital		135-155		95-110
Capacity replacement capital		135-150		145-160
Growth capital		30-45		10-25

We expect total capital expenditures for uranium and fuel services to decrease by about 11% in 2016.

Major sustaining, capacity replacement and growth expenditures in 2016 include:

•

McArthur River/Key Lake – At McArthur River, the largest projects are the expansion of freeze capacity and mine development. Other projects include site facility and equipment purchases. At Key Lake, work will be done to expand capacity in the solvent extraction and crystallization circuits of the mill.

•

US in situ recovery (ISR) – wellfield construction represents the largest portion of our expenditures in the US.

•

Rabbit Lake – At Eagle Point, the largest component is mine development, along with mine equipment upgrades and purchases. At the mill, we plan to optimize tailings capacity and work on various mill facility and equipment replacements.

•

Cigar Lake – Work to expand freezing capacity makes up the largest portion of capital at the Cigar Lake site. We are also paying our share of the costs to modify and expand the McClean Lake mill.

We previously expected to spend between $350 million and $400 million in 2017. We now expect to spend between $300 million and $350 million in 2017. Due to the continued market uncertainty, we have reduced growth capital to focus on our tier-one properties.

This information regarding currently expected capital expenditures for future periods is forward-looking information, and is based upon the assumptions and subject to the material risks discussed on pages 2 and 3. Our actual capital expenditures for future periods may be significantly different.

2015 Annual Report 39

FINANCING ACTIVITIES

Cash from financing includes borrowing and repaying debt, and other financial transactions including paying dividends and providing financial assurance.

Long-term contractual obligations


	2016		2017 AND 2018		2019 AND 2020		2021 AND BEYOND		TOTAL
DECEMBER 31 ($ MILLIONS)	2016		2017 AND 2018		2019 AND 2020		2021 AND BEYOND		TOTAL
Long-term debt		—		—		500		1,000		1,500
Interest on long-term debt		69		139		110		226		544
Provision for reclamation		13		80		81		801		975
Provision for waste disposal		3		14		—		—		17
Other liabilities		—		—		—		64		64
Capital commitments		55		—		—		—		55

Total		140		233		691		2,091		3,155

We have contractual capital commitments of approximately $55 million at December 31, 2015. Certain of the contractual commitments may contain cancellation clauses; however, we disclose the commitments based on management’s intent to fulfil the contracts.

We have unsecured lines of credit of about $2.7 billion, which include the following:

•

A $1.25 billion unsecured revolving credit facility that matures November 1, 2019. Each year on the anniversary date, and upon mutual agreement, the facility can be extended for an additional year. In addition to borrowing directly from this facility, we can use up to $100 million of it to issue letters of credit and we may use it to provide liquidity for our commercial paper program, as necessary. We may increase the revolving credit facility above $1.25 billion, by increments of no less than $50 million, up to a total of $1.75 billion. The facility ranks equally with all of our other senior debt. At December 31, 2015, there were no amounts outstanding under this facility.

•

Approximately $1.4 billion in letters of credit provided by various financial institutions. We use these facilities mainly to provide financial assurance for future decommissioning and reclamation of our operating sites, for our obligations relating to the CRA dispute, and as overdraft protection. At December 31, 2015, we had approximately $1.4 billion outstanding in letters of credit.

In total we have $1.5 billion in senior unsecured debentures outstanding:

•

$500 million bearing interest at 5.67% per year, maturing on September 2, 2019

•

$400 million bearing interest at 3.75% per year, maturing on November 14, 2022

•

$500 million bearing interest at 4.19% per year, maturing on June 24, 2024

•

$100 million bearing interest at 5.09% per year, maturing on November 14, 2042

Debt covenants

Our revolving credit facility includes the following financial covenants:

•

our funded debt to tangible net worth ratio must be 1:1 or less

•

other customary covenants and events of default

Funded debt is total consolidated debt less the following: non-recourse debt, $100 million in letters of credit, cash and short-term investments.

Not complying with any of these covenants could result in accelerated payment and termination of our revolving credit facility. At December 31, 2015, we complied with all covenants, and we expect to continue to comply in 2016.

40 CAMECO CORPORATION

NUKEM financing arrangements

NUKEM enters into financing arrangements with third parties where future receivables arising from certain sales contracts are sold to financial institutions in exchange for cash. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts, which are recognized as deferred sales (see notes 8 and 16 to the financial statements for more information). In addition, NUKEM is required to pledge the underlying inventory as security against these performance obligations. As of December 31, 2015, we had $97.9 million ($70.8 million (US)) of inventory pledged as security under financing arrangements, compared with $94.4 million ($81.4 million (US)) at December 31, 2014.

OFF-BALANCE SHEET ARRANGEMENTS

We had three kinds of off-balance sheet arrangements at the end of 2015:

•

purchase commitments

•

financial assurances

•

other arrangements

Purchase commitments

The table below is based on our purchase commitments at December 31, 2015. These commitments include a mix of fixed price and market-related contracts, and are with entities that buy and sell uranium and uranium-related products. Actual payments will be different as a result of changes to our purchase commitments and, in the case of contracts with market-related pricing, the market prices in effect at the time of purchase. We will update this table as required in our MD&A to reflect changes to our purchase commitments and changes in the prices used to estimate our commitments under market-related contracts.


	2016		2017 AND 2018		2019 AND 2020		2021 AND BEYOND		TOTAL
DECEMBER 31 ($ MILLIONS)	2016		2017 AND 2018		2019 AND 2020		2021 AND BEYOND		TOTAL
Purchase commitments¹		1,036		862		391		403		2,692

¹	Denominated in US dollars, converted to Canadian dollars as of December 31, 2015 at the rate of $1.38.

At the end of 2015, we had committed to $2.7 billion (Cdn) for the following:

•

approximately 38 million pounds of U₃O₈ equivalent from 2016 to 2028

•

approximately 4 million kgU as UF₆ in conversion services from 2016 to 2019

•

about 1 million Separative Work Units (SWU) of enrichment services to meet existing forward sales commitments under agreements with a non-Western supplier

The suppliers do not have the right to terminate agreements other than pursuant to customary events of default provisions.

Financial assurances

Standby letters of credit mainly provide financial assurance for the decommissioning and reclamation of our mining and conversion facilities as well as for our obligations relating to the CRA dispute. We are required to provide letters of credit to various regulatory agencies until decommissioning and reclamation activities are complete. We are also planning to provide letters of credit until the CRA dispute is resolved. Letters of credit are issued by financial institutions for a one-year term. At December 31, 2015 our financial assurances totaled $1.4 billion compared to $0.9 billion at December 31, 2014. The increase is mainly due to:

•

increased requirements for decommissioning letters of credit for Key Lake ($80 million)

•

obligations relating to the CRA dispute ($332 million)

•

exchange rate fluctuations ($65 million)

Other arrangements

We entered into a factoring arrangement where receivables arising from certain sales contracts are sold to a financial institution. Upon the sale, we assign the rights to the accounts receivable to the financial institution without recourse. This arrangement provides immediate access to cash and requires we collect payment from our customers and remit the payments to the financial institution. Expenses incurred under the arrangement are recognized within finance costs in the consolidated statement of earnings.

2015 Annual Report 41

In addition, NUKEM enters into arrangements with third parties where receivables arising from certain sales contracts are sold to financial institutions in exchange for cash. Upon the sale, NUKEM assigns the rights to the accounts receivable to the financial institution without recourse. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts; however, the customer is responsible for making payment directly to the financial institution. The discount at which the financial institution purchases the receivable is offset against the revenue NUKEM records on delivery of the product to the customer.

BALANCE SHEET


DECEMBER 31, ($ MILLIONS EXCEPT PER SHARE AMOUNTS)	2015		2014		2013		CHANGE 2014 TO 2015
DECEMBER 31, ($ MILLIONS EXCEPT PER SHARE AMOUNTS)	2015		2014		2013		CHANGE 2014 TO 2015
Inventory		1,285		902		913		42	%
Total assets		8,795		8,473		8,039		4	%
Long-term financial liabilities		2,500		2,448		1,915		2	%
Dividends per common share		0.40		0.40		0.40		—

Total product inventories increased by 42% to $1.3 billion this year due to higher levels of inventory for our uranium segment, where the quantities sold were lower than the quantities produced and purchased for the year. In 2015, total volume of product inventories for our uranium segment increased by 54%. During the year, we had the opportunity to purchase material at favourable prices, which added to our inventory position. In addition, the average cost of inventory increased by 15% due to the high cost of Cigar Lake production as it ramps up and the cost of material purchased during the year that was higher than the average cost of inventory at the beginning of the year. At December 31, 2015, our average cost for uranium was $36.72 per pound, up from $32.00 per pound at December 31, 2014.

At the end of 2015, our total assets amounted to $8.8 billion, an increase of $0.3 billion compared to 2014, primarily due to higher inventory and an increase in our deferred tax assets. In 2014, the total asset balance increased by $0.4 billion compared to 2013, primarily due to higher deferred tax assets and an increase in long-term receivables related to our CRA litigation.

The major components of long-term financial liabilities are long-term debt, the provision for reclamation, deferred sales and financial derivatives. In 2015, our balance did not change significantly. In 2014, our balance increased by $0.5 billion due to the early redemption of our Series C debentures and the issuance of the Series G debentures, as well as an increase in deferred sales.

42 CAMECO CORPORATION

2015 financial results by segment

Uranium


HIGHLIGHTS				2015		2014		CHANGE
Production volume (million lbs)					28.4		23.3		22	%

Sales volume (million lbs)¹					32.4		33.9		(4	)%

Average spot price	($	US/lb	)		36.55		33.21		10	%
Average long-term price	($	US/lb	)		46.29		46.46		—
Average realized price	($	US/lb	)		45.19		47.53		(5	)%
	($	Cdn/lb	)		57.58		52.37		10	%

Average unit cost of sales (including D&A)	($	Cdn/lb	)		38.83		34.64		12	%

Revenue ($ millions)¹					1,866		1,777		5	%

Gross profit ($ millions)					608		602		1	%

Gross profit (%)					33		34		(3	)%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (32,000 pounds in sales and revenue of $1.0 million in 2015, 1.4 million pounds in sales and revenue of $48 million in 2014).

Production volumes in 2015 increased by 22% compared to 2014. Lower production at our US ISR operations was more than offset by the rampup of Cigar Lake production. See Uranium – production overview on page 54 for more information.

Uranium revenues this year were up 5% compared to 2014 due to an increase of 10% in the Canadian dollar average realized price, partially offset by a decrease in sales volumes of 4%. The spot price for uranium averaged $36.55 (US) per pound in 2015, an increase of 10% compared to the 2014 average price of $33.21 (US) per pound; however, our US dollar average realized price was lower mainly due to lower prices under fixed price contracts. The effect of foreign exchange resulted in a higher Canadian dollar average realized price than in the prior year. The realized foreign exchange rate was $1.27 compared to $1.10 in 2014.

Total cost of sales (including D&A) increased by 7% ($1.26 billion compared to $1.18 billion in 2014) due to higher unit cost of sales offset by lower sales volumes. The higher unit cost of sales was mainly the result of an increase in the volume of material purchased at prices higher than our average cost of inventory, and an increase in unit production costs related to the addition of higher costs from Cigar Lake during rampup.

The net effect was a $6 million increase in gross profit for the year.

The following table shows the costs of produced and purchased uranium incurred in the reporting periods (non-IFRS measures, see below). These costs do not include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.


($CDN/LB)	2015		2014		CHANGE
Produced
Cash cost		20.62		18.66		11	%
Non-cash cost		11.51		9.30		24	%

Total production cost		32.13		27.96		15	%

Quantity produced (million lbs)		28.4		23.3		22	%

Purchased
Cash cost¹		46.02		38.17		21	%

Quantity purchased (million lbs)		12.5		7.1		76	%

Totals
Produced and purchased costs¹		36.38		30.34		20	%

Quantities produced and purchased (million lbs)		40.9		30.4		35	%

¹	Cash costs of purchased material in 2015 were $36.57 (US) per pound compared to $34.51 (US) per pound in 2014. In 2015, the exchange rate on purchases averaged $1.00 (US) for $1.26 (Cdn) compared to $1.00 (US) for $1.11 (Cdn) in 2014.

2015 Annual Report 43

Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.

These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

To facilitate a better understanding of these measures, the following table presents a reconciliation of these measures to our unit cost of sales for the years ended 2015 and 2014 as reported in our financial statements.

CASH AND TOTAL COST PER POUND RECONCILIATION



($ MILLIONS)	2015			2014
Cost of product sold		989.2			902.8
Add / (subtract)
Royalties		(116.5	)		(91.2	)
Standby charges		—			(24.8	)
Other selling costs		(13.8	)		(9.0	)
Change in inventories		301.8			(71.9	)

Cash operating costs (a)		1,160.7			705.9
Add / (subtract)
Depreciation and amortization		269.1			272.6
Change in inventories		58.1			(56.2	)

Total operating costs (b)		1,487.9			922.3

Uranium produced & purchased (million lbs) (c)		40.9			30.4

Cash costs per pound (a ÷ c)		28.38			23.22
Total costs per pound (b ÷ c)		36.38			30.34

URANIUM SEGMENT OUTLOOK

We expect to produce 30.0 million pounds in 2016 and have commitments under long-term contracts to purchase approximately 9 million pounds.

Based on the contracts we have in place, and not including sales between our segments, we expect to deliver between 30 million and 32 million pounds of U₃O₈ in 2016. We expect the unit cost of sales to be up to 5% higher than in 2015, primarily due to the planned purchases during the year. If we make additional discretionary purchases in 2016 at a cost different than our other sources of supply, then we expect the overall unit cost of sales to be affected.

We expect revenue to be up to 5% lower than in 2015 as a result of an expected decrease in deliveries, not including sales between our segments, partially offset by a higher average realized price.

ROYALTIES

We pay royalties on the sale of all uranium extracted at our mines in the province of Saskatchewan. Two types of royalties are paid:

•

Basic royalty: calculated as 5% of gross sales of uranium, less the Saskatchewan resource credit of 0.75%.

•

Profit royalty: a 10% royalty is charged on profit up to and including $22.70/kg U₃O₈ ($10.30/lb) and a 15% royalty is charged on profit in excess of $22.70/kg U₃O₈. Profit is determined as revenue less certain operating, exploration, reclamation and capital costs. Both exploration and capital costs are deductible at the discretion of the producer.

As a resource corporation in Saskatchewan, we also pay a corporate resource surcharge of 3% of the value of resource sales.

44 CAMECO CORPORATION

During the period from 2013 to 2015, transitional rules for the new profit royalty regime were applied whereby only 50% of capital costs were deductible. The remaining 50% was accumulated and will now be deductible beginning in 2016. In addition, the capital allowance related to Cigar Lake under the previous system was grandfathered and is also now deductible beginning in 2016. Based on the expected application of transitional and grandfathered capital allowance deductions, we anticipate that only the first tier of the profit royalty (10%) will apply in 2016 and 2017. As capital pools are depleted, we expect to also be subject to the top tier of the profit royalty (15%) in 2018.

Fuel services

(includes results for UF₆, UO₂ and fuel fabrication)


HIGHLIGHTS		2015		2014		CHANGE
Production volume (million kgU)			9.7		11.6		(16	)%
Sales volume (million kgU)¹			13.6		15.5		(12	)%
Average realized price	($Cdn/kgU)		23.37		19.70		19	%
Average unit cost of sales (including D&A)	($Cdn/kgU)		18.87		17.24		9	%
Revenue ($ millions)¹			319		306		4	%
Gross profit ($ millions)			61		38		61	%
Gross profit (%)			19		12		58	%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (339,000 kgU in sales and revenue of $2.9 million in 2015, 0.5 million kgU in sales and revenue of $4 million in 2014).

Total revenue increased by 4% due to a 19% increase in the realized price, partially offset by a 12% decrease in sales volumes.

The total cost of products and services sold (including D&A) decreased by 4% compared to 2014 ($258 million compared to $268 million in 2014), as a 12% decrease in sales volumes was partially offset by a 9% increase in the average unit cost of sales (including D&A). When compared to 2014, the average unit cost of sales was 9% higher due to the mix of fuel services products sold.

The net effect was a $23 million increase in gross profit.

FUEL SERVICES OUTLOOK

In 2016, we plan to produce 8 million to 9 million kgU, and we expect sales volumes, not including intersegment sales, to be up to 5% lower than in 2015. Overall revenue is expected to increase by up to 5% as lower sales volumes will be more than offset by an increase in the average realized price. We expect the average unit cost of sales (including D&A) to increase by 10% to 15%; therefore, overall gross profit will decrease as a result.

NUKEM


HIGHLIGHTS		2015		2014		CHANGE
Sales volume U₃O₈ (million lbs)¹			10.7		8.1		32	%
Average realized price	($Cdn/lb)		48.82		44.90		9	%
Cost of product sold (including D&A)			512		327		57	%
Revenue ($ millions)¹			554		349		59	%
Gross profit ($ millions)			42		22		91	%
Gross profit (%)			8		6		33	%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (0.9 million pounds in sales and revenue of $19.3 million in 2015, 1.1 million pounds in sales and revenue of $43 million in 2014).

During 2015, NUKEM delivered 10.7 million pounds of uranium, an increase of 2.6 million pounds compared to the previous year due to an increase in market activity. Revenues from NUKEM amounted to $554 million, 59% higher than in 2014 as a result of higher sales volumes and an increase in the average realized price, mainly due to weakening of the Canadian dollar. Gross profit percentage was 8% for 2015, compared to 6% for 2014.

The net effect was a $20 million increase in gross profit.

NUKEM OUTLOOK

For 2016, NUKEM expects to deliver between 9 million and 10 million pounds of uranium. Total revenue and unit cost of sales, not including intersegment sales, is expected to increase by 5% to 10% compared to 2015; however, the overall gross profit percentage is expected to be slightly lower than 2015 at 4% to 5%.

2015 Annual Report 45

Fourth quarter financial results

Consolidated results


	THREE MONTHS ENDED
HIGHLIGHTS	DECEMBER 31
($ MILLIONS EXCEPT WHERE INDICATED)	2015			2014		CHANGE
Revenue		975			889		10	%
Gross profit		282			251		12	%
Net earnings (loss) attributable to equity holders		(10	)		73		(114	)%
$ per common share (basic)		(0.03	)		0.18		(114	)%
$ per common share (diluted)		(0.03	)		0.18		(114	)%
Adjusted net earnings (non-IFRS, see page 25)		151			205		(26	)%
$ per common share (adjusted and diluted)		0.38			0.52		(27	)%
Cash provided by operations (after working capital changes)		503			236		113	%

NET EARNINGS

In the fourth quarter of 2015, our net loss was $10 million ($(0.03) per share diluted), a decrease of $83 million compared to net earnings of $73 million ($0.18 per share diluted) in 2014, mainly due to:

•

greater losses on foreign exchange derivatives resulting from the weakening of the Canadian dollar

•

lower income tax recovery due to the reduction of our deferred tax asset in the US

•

higher impairment charges in 2015 ($210 million in 2015, $131 million in 2014)

partially offset by:

•

higher uranium gross profits resulting mainly from a higher average realized price and higher sales volumes

•

higher gross profits from our fuel services segment due to a higher average realized price

•

lower exploration expenditures

•

the reduction of our provision related to the CRA litigation

In addition, in the fourth quarter of 2014 there was a favourable settlement of $37 million with respect to a dispute regarding a long-term supply contract with a utility customer that contributed to the higher net earnings in the fourth quarter of 2014 compared to the same period in 2015. The impact of the settlement was partially offset by the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects in the fourth quarter of 2014.

ADJUSTED NET EARNINGS

On an adjusted basis, our earnings this quarter were $151 million ($0.38 per share diluted) compared to $205 million ($0.52 per share diluted) (non-IFRS measure, see page 25) in 2014, mainly due to:

•

a lower income tax recovery primarily due to the reduction of our deferred tax asset in the US

partially offset by:

•

higher uranium gross profits resulting mainly from a higher average realized price and higher sales volumes

•

higher gross profits from our fuel services segment mainly due to a higher average realized price

•

lower exploration expenditures

•

the reduction of our provision related to the CRA litigation

46 CAMECO CORPORATION

We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our financial performance from period to period. See page 25 for more information. The following table reconciles adjusted net earnings with our net earnings.


	THREE MONTHS ENDED DECEMBER 31
($ MILLIONS)	2015			2014
Net earnings (loss) attributable to equity holders		(10	)		73

Adjustments
Adjustments on derivatives (pre-tax)		10			10
NUKEM purchase price inventory recovery		—			(4	)
Impairment charges		210			131
Income taxes on adjustments		(59	)		(46	)
Write-off of assets		—			41

Adjusted net earnings		151			205

ADMINISTRATION


	THREE MONTHS ENDED DECEMBER 31
($ MILLIONS)	2015		2014		CHANGE
Direct administration		51		52		(2	)%
Stock-based compensation		4		3		33	%

Total administration		55		55		—

Direct administration costs were $51 million in the quarter, $1 million lower than the same period last year due to the timing of expenditures, partially offset by higher legal costs as our CRA dispute progresses toward trial. Stock-based compensation expenses were $1 million higher than the fourth quarter of 2014. See note 25 to the financial statements.

Quarterly trends


HIGHLIGHTS	2015												2014
($ MILLIONS EXCEPT PER SHARE AMOUNTS)	Q4			Q3			Q2			Q1			Q4		Q3			Q2			Q1
Revenue		975			649			565			566			889		587			502			419
Net earnings (loss) attributable to equity holders		(10	)		(4	)		88			(9	)		73		(146	)		127			131
$ per common share (basic)		(0.03	)		(0.01	)		0.22			(0.02	)		0.18		(0.37	)		0.32			0.33
$ per common share (diluted)		(0.03	)		(0.01	)		0.22			(0.02	)		0.18		(0.37	)		0.32			0.33
Adjusted net earnings (non-IFRS, see page 25)		151			78			46			69			205		93			79			36
$ per common share (adjusted and diluted)		0.38			0.20			0.12			0.18			0.52		0.23			0.20			0.09
Earnings (loss) from continuing operations		(10	)		(4	)		88			(10	)		72		(146	)		127			4
$ per common share (basic)		(0.03	)		(0.01	)		0.22			(0.02	)		0.18		(0.37	)		0.18			0.01
$ per common share (diluted)		(0.03	)		(0.01	)		0.22			(0.02	)		0.18		(0.37	)		0.18			0.01
Cash provided by continuing operations (after working capital changes)		503			(121	)		(65	)		134			236		263			(25	)		7

Key things to note:

•

Our financial results are strongly influenced by the performance of our uranium segment, which accounted for 70% of consolidated revenues in the fourth quarter of 2015 and 68% of consolidated revenues in the fourth quarter of 2014.

•

The timing of customer requirements, which tends to vary from quarter to quarter, drives revenue in the uranium and fuel services segments.

•

Net earnings do not trend directly with revenue due to unusual items and transactions that occur from time to time. We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our results from period to period (see page 25 for more information).

•

Cash from operations tends to fluctuate as a result of the timing of deliveries and product purchases in our uranium and fuel services segments.

•

Quarterly results are not necessarily a good indication of annual results due to the variability in customer requirements noted above.

2015 Annual Report 47

Fourth quarter financial results by segment

Uranium


		THREE MONTHS ENDED DECEMBER 31
HIGHLIGHTS		2015		2014		CHANGE
Production volume (million lbs)			9.6		8.2		17	%

Sales volume (million lbs)¹			11.2		10.7		5	%

Average spot price	($US/lb)		35.45		37.13		(5	)%
Average long-term price	($US/lb)		44.00		48.00		(8	)%
Average realized price	($US/lb)		46.36		50.57		(8	)%
	($Cdn/lb)		61.24		56.78		8	%

Average unit cost of sales (including D&A)	($Cdn/lb)		38.25		34.27		12	%

Revenue ($ millions)¹			687		606		13	%

Gross profit ($ millions)			257		240		7	%

Gross profit (%)			37		40		(8	)%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (17,000 pounds in sales and revenue of $0.5 million in Q4 2015, 400,000 pounds in sales and revenue of $15 million in Q4 2014).

Production volumes this quarter were 17% higher compared to the fourth quarter of 2014, mainly as a result of higher production from the rampup of Cigar Lake production, offset by lower production at McArthur River/Key Lake, Rabbit Lake and our US ISR operations. See Uranium – production overview on page 54 for more information.

Uranium revenues were up 13% due to a 5% increase in sales volumes, which represents normal quarterly variance in our delivery schedule, and an 8% increase in the average realized price.

Average spot and long-term prices decreased, as did our US dollar average realized price due to lower prices under fixed-price contracts, and the mix of market and fixed contracts. However, the effect of foreign exchange resulted in an 8% higher Canadian dollar average realized price than the prior year. In the fourth quarter of 2015, our realized foreign exchange rate was $1.32 compared to $1.12 in the prior year.

Total cost of sales (including D&A) increased by 17% ($429 million compared to $366 million in 2014). This was the result of a 12% increase in the average unit cost of sales and a 5% increase in sales volumes.

The unit cost of sales increased due to an increase in the volume of material purchased throughout the year at prices higher than our average cost of inventory and an increase in the unit production costs related to the addition of higher cost production from Cigar Lake during rampup.

The net effect was a $17 million increase in gross profit for the quarter.

48 CAMECO CORPORATION

The following table shows the costs of produced and purchased uranium incurred in the reporting periods (which are non-IFRS measures, see the paragraphs below the table). These costs do not include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.


	THREE MONTHS ENDED DECEMBER 31
($/LB)	2015		2014		CHANGE
Produced
Cash cost		16.04		14.19		13	%
Non-cash cost		10.96		7.15		53	%

Total production cost		27.00		21.34		27	%

Quantity produced (million lbs)		9.6		8.2		17	%

Purchased
Cash cost¹		43.65		39.03		12	%

Quantity purchased (million lbs)		3.2		3.7		(14	)%

Totals
Produced and purchased costs¹		31.16		26.84		16	%

Quantities produced and purchased (million lbs)		12.8		11.9		8	%

In the fourth quarter of 2015, cash costs of purchased material were $33.79 (US) per pound compared to $35.05 (US) per pound in the same period in 2014. In the fourth quarter of 2015, the exchange rate on purchases averaged $1.00 (US) for $1.29 (Cdn) compared to $1.00 (US) for $1.11 (Cdn) during the same period in 2014.

To facilitate a better understanding of these measures, the following table presents a reconciliation of these measures to our unit cost of sales for the fourth quarters of 2015 and 2014.

CASH AND TOTAL COST PER POUND RECONCILIATION


	THREE MONTHS ENDED DECEMBER 31
($ MILLIONS)	2015			2014
Cost of product sold		328.3			269.0
Add / (subtract)
Royalties		(49.5	)		(34.5	)
Other selling costs		(6.7	)		(2.3	)
Change in inventories		21.5			28.5

Cash operating costs (a)		293.6			260.7
Add / (subtract)
Depreciation and amortization		100.9			96.7
Change in inventories		4.3			(38.0	)

Total operating costs (b)		398.8			319.4

Uranium produced & purchased (million lbs) (c)		12.8			11.9

Cash costs per pound (a ÷ c)		22.94			21.91
Total costs per pound (b ÷ c)		31.16			26.84

2015 Annual Report 49

Fuel services

(includes results for UF₆, UO₂ and fuel fabrication)


		THREE MONTHS ENDED DECEMBER 31
HIGHLIGHTS		2015		2014		CHANGE
Production volume (million kgU)			3.4		2.7		26	%
Sales volume (million kgU)¹			4.5		7.4		(39	)%
Average realized price	($Cdn/kgU)		21.88		16.92		29	%
Average unit cost of sales (including D&A)	($Cdn/kgU)		17.18		14.78		16	%
Revenue ($ millions)¹			99		125		(21	)%
Gross profit ($ millions)			21		16		31	%
Gross profit (%)			21		13		62	%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (339,000 kgU in sales and revenue of $2.9 million in Q4 2015, 0.5 million kgU in sales and revenue of $4 million in Q4 2014).

Total revenue decreased by 21% due to a 39% decrease in sales volumes, partially offset by a 29% increase in average realized price.

The total cost of sales (including D&A) decreased by 28% ($78 million compared to $109 million in the fourth quarter of 2014) mainly due to a 39% decrease in sales volumes, partially offset by an increase of 16% in the average unit cost of sales, primarily as a result of the mix of products sold.

The net effect was a $5 million increase in gross profit.

NUKEM


		THREE MONTHS ENDED DECEMBER 31
HIGHLIGHTS		2015		2014		CHANGE
Sales volume U₃O₈ (million lbs)¹			3.7		3.4		9	%
Average realized price	($Cdn/lb)		52.22		52.12		—
Cost of product sold (including D&A)			186		156		19	%
Revenue ($ millions)¹			192		159		21	%
Gross profit ($ millions)			6		3		100	%
Gross profit (%)			3		2		50	%

¹	Includes sales and revenue between our uranium, fuel services and NUKEM segments (nil in Q4 2015, 1.1 million pounds in sales and revenue of $43 million in Q4 2014).

NUKEM delivered 3.7 million pounds of uranium, an increase of 0.3 million pounds compared to 2014. NUKEM revenues amounted to $192 million compared to $159 million in 2014 due to an increase in volumes delivered.

Gross profit percentage was 3% in the fourth quarter of 2015, compared to 2% in the fourth quarter of 2014.

The net effect was a $3 million increase in gross profit.

50 CAMECO CORPORATION

Our operations and projects

This section of our MD&A is an overview of each of our operations, what we accomplished this year, our plans for the future and how we manage risk.


52		MANAGING THE RISKS

54		URANIUM – PRODUCTION OVERVIEW

54		PRODUCTION OUTLOOK

55		URANIUM – OPERATING PROPERTIES

55		MCARTHUR RIVER MINE / KEY LAKE MILL

60		CIGAR LAKE

65		INKAI

68		RABBIT LAKE

70		SMITH RANCH-HIGHLAND

71		CROW BUTTE

72		URANIUM – PROJECTS UNDER EVALUATION

72		MILLENNIUM

72		YEELIRRIE

72		KINTYRE

74		URANIUM – EXPLORATION AND CORPORATE DEVELOPMENT

76		FUEL SERVICES

76		BLIND RIVER REFINERY

77		PORT HOPE CONVERSION SERVICES

77		CAMECO FUEL MANUFACTURING INC. (CFM)

79		NUKEM GMBH

2015 Annual Report 51

Managing the risks

The nature of our operations means we face many potential risks and hazards that could have a significant impact on our business. Our risk policy and process involves a broad, systematic approach to identifying, assessing, reporting and managing the significant risks we face in our business and operations. The policy establishes clear accountabilities for enterprise risk management. We use a common risk matrix throughout the company and consider any risk that has the potential to significantly affect our ability to achieve our corporate objectives or strategic plan as an enterprise risk. However, there is no assurance we will be successful in preventing the harm any of these risks and hazards could cause. We recommend you read our most recent management proxy circular for more information about our risk oversight.

Below we list the regulatory, environmental and operational risks that generally apply to all of our operations and projects under evaluation. We also talk about how we manage specific risks in each operation or project update. These risks could have a material impact on our business in the near term.

We recommend you also review our annual information form, which includes a discussion of other material risks that could have an impact on our business.

Regulatory risks

A significant part of our economic value depends on our ability to:

•

obtain and renew the licences and other approvals we need to operate, to increase production at our mines and to develop new mines. If we do not receive the regulatory approvals we need, or do not receive them at the right time, then we may have to delay, modify or cancel a project, which could increase our costs and delay or prevent us from generating revenue from the project. Regulatory review, including the review of environmental matters, is a long and complex process.

•

comply with the conditions in these licences and approvals. In a number of instances, our right to continue operating facilities, increase production at our mines and develop new mines depends on our compliance with these conditions.

•

comply with the extensive and complex laws and regulations that govern our activities, including our growth plans. Environmental legislation imposes strict standards and controls on almost every aspect of our operations and the mines we plan to develop, and is not only introducing new requirements, but also becoming more stringent. For example:

•

we must complete the environmental assessment process before we can begin developing a new mine or make any significant change to our operations

•

we may need regulatory approval to make changes to our operational processes, which can take a significant amount of time because it may require an extensive review of supporting technical information. The complexity of this process can be further compounded when regulatory approvals are required from multiple agencies.

•

Environment Canada has brought forward a national recovery plan for woodland caribou that has the potential to impact economic and social development in northern Saskatchewan. Additional research work is being conducted so that a determination can be made on the sustainability of the species within the region. The research could result in measures being taken to further limit habitat disturbance in order to improve the health of the woodland caribou population in northern Saskatchewan, and it could have an impact on our Saskatchewan operations and projects under evaluation.

•

Environment Canada has been reviewing the Metal Mining Effluent Regulations (MMER). This review could result in new limits for existing MMER substances and proposed limits for new substances that could impact our Saskatchewan operations.

•

The U.S. Environmental Protection Agency is proposing to add new health and environmental protection standards to regulate byproduct materials produced by uranium in situ recovery operations. The proposed rule includes surface and subsurface standards, with a primary focus on groundwater protection, restoration and stability. Particularly concerning is the proposed requirement that groundwater must be monitored for 30 years after restoration.

We use significant management and financial resources to manage our regulatory risks.

Environmental risks

We have the safety, health and environmental risks associated with any mining and chemical processing company. Our uranium and fuel services segments also face unique risks associated with radiation.

52 CAMECO CORPORATION

Laws to protect the environment are becoming more stringent for members of the nuclear energy industry and have inter-jurisdictional aspects (both federal and provincial/state regimes are applicable). Once we have permanently stopped mining and processing activities at an operating site, we are required to decommission the site to the satisfaction of the regulators. We have developed conceptual decommissioning plans for our operating sites and use them to estimate our decommissioning costs. Regulators review our conceptual decommissioning plans on a regular basis. As the site approaches or goes into decommissioning, regulators review the detailed decommissioning plans. This can result in further regulatory process, as well as additional requirements, costs and financial assurances.

At the end of 2015, our estimate of total decommissioning and reclamation costs was $975 million. This is the undiscounted value of the obligation and is based on our current operations. We had accounting provisions of $917 million at the end of 2015 (the present value of the $975 million). Since we expect to incur most of these expenditures at the end of the useful lives of the operations they relate to, our expected costs for decommissioning and reclamation for the next five years are not material.

We provide financial assurances for decommissioning and reclamation such as letters of credit to regulatory authorities, as required. We had a total of $1 billion in letters of credit supporting our reclamation liabilities at the end of 2015. All of our North American operations have letters of credit in place that provide financial assurance in connection with our preliminary plans for decommissioning of the sites.

Some of the sites we own or operate have been under ongoing investigation and/or remediation and planning as a result of historic soil and groundwater conditions. For example, we are addressing issues related to historic soil and groundwater contamination at Port Hope.

We use significant management and financial resources to manage our environmental risks.

We manage environmental risks through our safety, health, environment and quality (SHEQ) management system. Our chief executive officer is responsible for ensuring that our SHEQ management system is implemented. Our board’s safety, health and environment committee also oversees how we manage our environmental risks.

In 2015, we invested:

•

$77 million in environmental protection, monitoring and assessment programs, about the same as 2014

•

$31 million in health and safety programs, or 29% more than 2014 as a result of ventilation improvements at McArthur River

Spending on environmental programs is expected to increase slightly in 2016, while spending on health and safety programs will decrease toward 2014 levels.

Operational risks

Other operational risks and hazards include:

•

environmental damage

•

industrial and transportation accidents

•

labour shortages, disputes or strikes

•

cost increases for labour, contracted or purchased materials, supplies and services

•

shortages of required materials, supplies and equipment

•

transportation disruptions

•

electrical power interruptions

•

equipment failures

•

non-compliance with laws and licences

•

catastrophic accidents

•

fires

•

blockades or other acts of social or political activism

•

natural phenomena, such as inclement weather conditions, floods and earthquakes

•

unusual, unexpected or adverse mining or geological conditions

•

underground floods

•

ground movement or cave-ins

•

tailings pipeline or dam failures

•

technological failure of mining methods

We have insurance to cover some of these risks and hazards, but not all of them, and not to the full amount of losses or liabilities that could potentially arise.

2015 Annual Report 53

Uranium – production overview

Production in our uranium segment in the fourth quarter was 9.6 million pounds, 17% higher compared to the same period in 2014 primarily due to the rampup of production at Cigar Lake. Production for the year was 28.4 million pounds, 22% higher than in 2014. See Uranium - operating properties starting on page 55 for more information.

Uranium production


CAMECO SHARE	THREE MONTHS ENDED DECEMBER 31				YEAR ENDED DECEMBER 31
(MILLION LBS)	2015		2014		2015		2014		2015 PLAN¹		2016 PLAN
McArthur River/Key Lake		3.8		4.4		13.3		13.3		13.7		14.0
Cigar Lake		2.3		0.2		5.7		0.2		4.0 - 5.0		8.0	²
Inkai		1.1		0.7		3.4		2.9		3.0		3.0
Rabbit Lake		2.0		2.1		4.2		4.2		3.9		3.6
Smith Ranch-Highland		0.3		0.6		1.4		2.1		1.4		1.2
Crow Butte		0.1		0.2		0.4		0.6		0.3		0.2

Total		9.6		8.2		28.4		23.3		26.3 - 27.3		30.0	²

¹	We updated our initial 2015 plan for Cigar Lake (to 5 million pounds, from between 3 and 4 million pounds) in our Q3 MD&A.

²	Our 2016 plan for packaged production from Cigar Lake is subject to regulatory approval for an annual production limit increase at the McClean Lake mill. See Uranium – operating properties – Cigar Lake starting on page 60 for more information.

Production Outlook

We remain focused on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals in order to increase long-term shareholder value.

We plan to:

•

ensure continued safe, reliable, low-cost production from our tier-one assets – McArthur River/Key Lake, Cigar Lake and Inkai

•

complete rampup of production at Cigar Lake

•

seek to expand production at McArthur River/Key Lake in conjunction with market signals

•

manage the rest of our sources of supply in a manner that retains the flexibility to respond to market signals and take advantage of value adding opportunities within our own portfolio and the uranium market

•

maintain our low-cost advantage by focusing on execution and operational excellence

54 CAMECO CORPORATION

Uranium – operating properties

McArthur River mine / Key Lake mill

LOGO

2015 Production (our share)

13.3M lbs

2016 Production Outlook (our share)

14.0M lbs

Estimated Reserves (our share)

234.9M lbs

Estimated Mine Life

2033

LOGO

McArthur River is the world’s largest, high-grade uranium mine, and Key Lake is the world’s largest uranium mill.

Ore grades at the McArthur River mine are 100 times the world average, which means it can produce more than 19 million pounds per year by mining only 150 to 200 tonnes of ore per day. We are the operator of both the mine and mill.

McArthur River is one of our three material uranium properties.


Location		Saskatchewan, Canada
Ownership		McArthur River – 69.805%
		Key Lake – 83.33%
Mine type		Underground
Mining methods		Primary: raiseboring
		Secondary: blasthole stoping, boxhole boring
End product		Uranium concentrates
Certification		ISO 14001 certified
Estimated reserves		234.9 million pounds (proven and probable), average grade U₃O₈: 10.94%
Estimated resources		3.9 million pounds (measured and indicated), average grade U₃O₈: 3.77%
		40.9 million pounds (inferred), average grade U₃O₈: 7.72%
Licensed capacity		Mine and mill: 25.0 million pounds per year
Licence term		Through October, 2023
Total production: 2000 to 2015		291.1 million pounds (McArthur River/Key Lake) (100% basis)
1983 to 2002		209.8 million pounds (Key Lake) (100% basis)
2015 production		13.3 million pounds (19.1 million pounds on 100% basis)
2016 production outlook		14.0 million pounds (20.0 million pounds on 100% basis)
Estimated decommissioning cost		$48 million – McArthur River (100% basis)
		$218 million – Key Lake (100% basis)

All values shown, including reserves and resources, represent our share only, unless indicated.

BACKGROUND

Mining methods and techniques

We use a number of innovative methods to mine the McArthur River deposit:

Ground freezing

The sandstone that overlays the deposit and basement rocks is water-bearing, with large volumes of water under significant pressure. We use ground freezing to form an impermeable wall around the area being mined. This prevents water from entering the mine, and helps stabilize weak rock formations. To date, we have isolated six mining areas with freezewalls.

2015 Annual Report 55

Raisebore mining

Raisebore mining is an innovative non-entry approach that we adapted to meet the unique challenges at McArthur River. It involves:

•

drilling a series of overlapping holes through the ore zone from a raisebore chamber in waste rock above the mineralization

•

collecting the broken ore at the bottom of the raises using line-of-sight remote-controlled scoop trams, and transporting it to an underground grinding circuit

•

once mining is complete, filling each raisebore hole with concrete

•

when all the rows of raises in a chamber are complete, removing the equipment and filling the entire chamber with concrete

•

starting the process again with the next raisebore chamber

LOGO

McArthur River currently has six areas with delineated mineral reserves and delineated mineral resources (zones 1 to 4, zone 4 south and zone B) and two additional areas with delineated mineral resources (zone A, McArthur north). We are currently mining zone 2 and zone 4.

Zone 2 has been actively mined since production began. It is divided into four panels (panels 1, 2, 3 and 5) based on the configuration of the freezewall around the ore. As the freezewall is expanded, the inner connecting freezewalls are decommissioned in order to recover the uranium that was inaccessible around the active freeze pipes. Panel 5 represents the upper portion of zone 2, overlying part of the other panels. The majority of the remaining zone 2 proven mineral reserves are in panel 5.

Zone 4 is divided into three mining areas: central, north and south. We are actively mining the central and north areas.

The Canadian Nuclear Safety Commission (CNSC) has granted approval for the use of two secondary extraction methods: blasthole stoping and boxhole boring.

Our use of blasthole stoping as an ore extraction method has increased as a result of the significant productivity improvements we have achieved with this method. The amount of ore extracted from a single stope can be equivalent to four to eight raisebore holes, resulting in more efficient mining, less waste rock handling, less backfill placement and lower backfill dilution in the ore shipped to Key Lake.

We have used the approved mining methods to successfully extract over 290 million pounds (100% basis) since we began mining in 1999. Raisebore mining is scheduled to remain the primary extraction method over the life of mine, although we now expect to mine a significant portion of the remaining reserves with blasthole stoping.

56 CAMECO CORPORATION

Blasthole stoping

Similar to raiseboring, blasthole stoping requires establishing drill access above the mineralization and extraction access below the mineralization. We begin each stope with a single raisebore hole (explained above). The stope is then formed by expanding the circumference of the raise by drilling longholes around the raisebore hole and blasting the ore. The blasted material funnels into the raisebore hole and drops to the extraction level below. The broken rock is collected on the lower level and removed by line-of-sight remote-controlled scoop trams, then transported to the grinding circuit. Once a stope is mined out, it is backfilled with concrete to maintain ground stability and allow the next stope and/or raise to be mined. This mining method has been used extensively in the mining industry, including uranium mining.

We continue to employ blasthole stoping only in areas where the longholes can be accurately drilled, and where stable stopes can be excavated without jeopardizing the integrity of the freezewall.

Boxhole boring

Boxhole boring is similar to the raisebore method, but the drilling machine is located below the mineralization, so development is not required above the mineralization. This method is currently being used at a few mines around the world, but had not been used for uranium mining prior to testing at McArthur River.

Test mining to date has identified this as a viable mining option; however, only a minor amount of ore is scheduled to be extracted using this method.

Initial processing

We carry out initial processing of the extracted ore at McArthur River:

•

the underground circuit grinds the ore and mixes it with water to form a slurry

•

the slurry is pumped 680 metres to the surface and stored in one of four ore slurry holding tanks

•

it is blended and thickened, removing excess water

•

the final slurry, at an average grade of 15% U₃O₈, is pumped into transport truck containers and shipped to Key Lake mill on an 80 kilometre all-weather road

Water from this process, including water from underground operations, is treated on the surface. Any excess treated water is released into the environment.

2015 UPDATE

Production

Production from McArthur River/Key Lake was 19.1 million pounds; our share was 13.3 million pounds. This was 3% lower than our forecast for the year due to unplanned maintenance outages to repair the calciner at Key Lake. Annual production was unchanged from 2014.

Licensing and production capacity

In 2015, the CNSC approved our application to increase McArthur River’s licensed annual production to 25 million pounds (100% basis) to allow flexibility to match the approved Key Lake mill capacity. The licence conditions handbooks for these operations now allow both operations to produce up to 25 million pounds (100% basis) per year.

Key Lake extension and McArthur River production expansion

In support of our strategy to maintain the flexibility to respond to market conditions as they evolve, we continue to advance projects that are necessary to sustain and increase production when the market signals that additional production is needed.

2015 Annual Report 57

The Key Lake mill began operating in 1983 and we continue to upgrade circuits with new technology to simplify operations and improve environmental performance. The extension project involved increasing our tailings capacity and the mill’s nominal annual production rate to closely follow production from the McArthur River mine. As part of the mill upgrades, we continue to construct and commission a new calciner circuit, and expect to begin operating with the new calciner in 2016. The existing calciner circuit will remain in place until operational reliability of the new calciner is achieved. The calciner replacement project was planned in a way that temporarily allows us to use either calciner, which will help to mitigate risks to our production rate during the commissioning phase. In order to increase production at Key Lake, we also need to optimize and expand the solvent extraction and crystallization circuits in the mill (projects planned for 2017).

At McArthur River, we must continue to successfully transition into new mine areas through mine development and investment in support infrastructure. We plan to:

•

improve our dewatering system and expand our water treatment capacity as required to mitigate capacity losses, should mine development increase background water volumes

•

expand the concrete distribution systems and batch plant capacity

New mining areas

New mining zones and increased mine production require increased freeze capacity and ventilation. In 2015, we continued to upgrade our electrical infrastructure on surface as part of our plan to address these future needs. We advanced groundworks to prepare for the next freeze plant, which is scheduled to begin freezing the south end of the orebody (zone 4) in 2017.

We also made changes in shaft 2 to increase air flow, resulting in a 15% to 20% improvement in ventilation capacity. The improved ventilation eliminates the need for a new ventilation shaft to support a higher production rate.

Tailings capacity

We expect to have sufficient tailings capacity to mill all the known McArthur River mineral reserves and resources, should they be converted to reserves, with additional capacity to toll mill ore from other regional deposits.

PLANNING FOR THE FUTURE

Production

We plan to produce 20.0 million pounds in 2016; our share is 14.0 million pounds.

Expansion progress

As previously disclosed in our 2012 Technical Report, we plan to reach an annual capacity of 22 million pounds by 2018. The capital required to do so is shown in our 2016 capital spending plan, and in our outlook for investing activities in 2017 and 2018, beginning on page 38.

As we increase to 22 million pounds per year, we will optimize the capacity of both the Key Lake mill and McArthur River mine with a view to further increasing production to 25 million pounds per year (100% basis), as market conditions improve. Using this approach, we do not expect significant additional growth capital will be required to increase from annual production of 22 million pounds to an annual rate of 25 million pounds. We expect that this paced approach will allow us to extract maximum value from the operation as the market transitions.

Exploration

In 2015, underground drilling further delineated the zone A mineral resources. Underground definition drilling of zone B will be conducted in 2016 and 2017 to provide the information required for engineering work to develop more detailed mining plans.

MANAGING OUR RISKS

Production at McArthur River/Key Lake poses many challenges: control of groundwater, weak rock formations, radiation protection, water inflow, mine area transitioning, and regulatory approvals. Operational experience gained since the start of production has resulted in a significant reduction in risk.

58 CAMECO CORPORATION

Transition to new mining areas

In order to successfully achieve the planned production schedule, we must continue to successfully transition into new mining areas, which includes mine development and investment in critical support infrastructure.

Water inflow risk

The greatest risk is production interruption from water inflows. A 2003 water inflow resulted in a three-month suspension of production. We also had a small water inflow in 2008 that did not impact production.

The consequences of another water inflow at McArthur River would depend on its magnitude, location and timing, but could include a significant interruption or reduction in production, a material increase in costs or a loss of mineral reserves.

We take the following steps to reduce the risk of inflows, but there is no guarantee that these will be successful:

•

Ground freezing: Before mining, we drill freezeholes and freeze the ground to form an impermeable freezewall around the area being mined. Ground freezing reduces but does not eliminate the risk of water inflows.

•

Mine development: We plan for our mine development to take place away from known groundwater sources whenever possible. In addition, we assess all planned mine development for relative risk and apply extensive additional technical and operating controls for all higher risk development.

•

Pumping capacity and treatment limits: Our standard for this project is to secure pumping capacity of at least one and a half times the estimated maximum sustained inflow. We review our dewatering system and requirements at least once a year and before beginning work on any new zone.

We believe we have sufficient pumping, water treatment and surface storage capacity to handle the estimated maximum sustained inflow.

We also manage the risks listed on pages 52 to 53.

2015 Annual Report 59

Uranium – operating properties

Cigar Lake

2015 Production (our share)

5.7M lbs

2016 Production Outlook (our share)

8.0M lbs¹

Estimated Reserves (our share)

110.9M lbs

Estimated Mine Life

2028

LOGO

Cigar Lake is the world’s highest grade uranium mine, with grades that are 100 times the world average. We are a 50% owner and the mine operator.

Cigar Lake is one of our three material uranium properties.


Location		Saskatchewan, Canada
Ownership		50.025%
Mine type		Underground
Mining method		Jet boring system
End product		Uranium concentrates
Certification		ISO 14001 certified
Estimated reserves		110.9 million pounds (proven and probable), average grade U₃O₈: 16.70%
Estimated resources		1.6 million pounds (measured and indicated), average grade U₃O₈: 7.38% 51.6 million pounds (inferred), average grade U₃O₈: 16.43%
Licensed capacity		18.0 million pounds per year (our share 9.0 million pounds per year)
Licence term		Through June, 2021
Total production: 2014 to 2015		11.8 million pounds (100% basis)
2015 production		5.7 million pounds (11.3 million pounds on 100% basis)
2016 production outlook		8.0 million pounds (16.0 million pounds on 100% basis)¹
Estimated decommissioning cost		$49 million (100% basis)

¹	Our 2016 production plan is subject to regulatory approval for a production increase at the McClean Lake mill.

All	values shown, including reserves and resources, represent our share only, unless indicated.

BACKGROUND

Development

We began developing the Cigar Lake underground mine in 2005, but development was delayed due to water inflows. In October 2014, the McClean Lake mill produced first uranium concentrate from ore mined at the Cigar Lake operation. Commercial production was declared in May 2015.

Mining method and development techniques

Bulk freezing

The sandstone that overlays the deposit and basement rocks is water-bearing, with large volumes of water under significant pressure. To prevent water from entering the mine, help stabilize weak rock formations, and meet our production schedule, the ore zone and surrounding ground in the area to be mined must meet specific ground freezing requirements before we begin jet boring.

60 CAMECO CORPORATION

During construction, development and remediation of the underground infrastructure, we employed a hybrid ground freezing approach using a combination of underground and surface freezing. The costs related to each technique are similar; however, there are significant advantages to freezing the ground from the surface. With surface freezing, less mine development is required, which results in less waste rock and greater ground stability, since freeze tunnels are not required between production tunnels. In addition, congestion is reduced and underground development for freeze infrastructure is no longer a critical path mine activity. Based on these advantages, we have elected to proceed exclusively using surface freezing to mine current reserves at Cigar Lake.

LOGO

Jet boring

After many years of test mining, we selected jet boring, a non-entry mining method, which we have developed and adapted specifically for this deposit. This method involves:

•

drilling a pilot hole into the frozen orebody, inserting a high pressure water jet and cutting a cavity out of the frozen ore

•

collecting the ore and water mixture (slurry) from the cavity and pumping it to storage (sump storage), allowing it to settle

•

using a clamshell, transporting the ore from the sump storage to a grinding and processing circuit, eventually loading a tanker truck with ore slurry for transport to the mill

•

once mining is complete, filling each cavity in the orebody with concrete

•

starting the process again with the next cavity

Jet boring system (JBS) process

LOGO

2015 Annual Report 61

We have divided the orebody into production panels and at least three production panels need to be frozen at one time to achieve the full annual production rate of 18 million pounds. One JBS machine will be located in each frozen panel and the three JBS machines required are currently in operation. Due to limitations on the availability of high pressure water, two machines can be actively mining at any given time while the third is moving, setting up, or undergoing maintenance. Later in the mine plan, we may require a fourth JBS machine to sustain annual production of 18 million pounds.

Milling

All of Cigar Lake’s ore slurry is being processed at the McClean Lake mill, operated by AREVA. The McClean Lake mill is undergoing modifications and expansion in order to:

•

operate at Cigar Lake’s targeted annual production level of 18 million pounds U₃O₈

•

process and package all of Cigar Lake’s current mineral reserves

The Cigar Lake joint venture is paying the capital costs for the modification and expansion.

2015 UPDATE

Production

Total packaged production from Cigar Lake was 11.3 million pounds U₃O₈; our share was 5.7 million pounds. The operation exceeded our forecast of 10 million pounds (100% basis) as a result of higher productivity and our intention to adjust annual production as necessary, based on our operating experience during rampup.

During the year, we:

•

completed commissioning of the equipment required to operate three JBS units at a production scale

•

brought on additional slurry haul trucks to ensure a sufficient quantity of ore slurry can be transported to the McClean Lake mill

•

completed final commissioning of underground processing circuits and updated our production rampup plan based on commissioning experience

•

modified mine and project plans to reflect our decision to exclusively freeze from surface

•

declared commercial production

Commercial production

Commercial production signals a transition in the accounting treatment for costs incurred at the mine. Cigar Lake met all of the criteria for commercial production, including cycle time and process specifications, in the second quarter of 2015. Therefore, effective May 1, 2015, we began charging all production costs, including depreciation, to inventory and subsequently recognizing them in cost of sales as the product is sold.

Underground development

As a result of our decision to exclusively use surface freezing going forward, and the resulting change in the mine plan, the bulk of the development and freeze drilling required for mining in 2016 is already complete. We are continuing to plan for future expansion of surface freezing infrastructure in late 2016.

McClean Lake mill update

Additional estimated expenditures of $50 million (100% basis, our share $25 million) are expected to be required at the McClean Lake mill in 2016, primarily to complete upgrades in the tailings neutralization area in support of the continued rampup to full production of 18 million pounds per year.

PLANNING FOR THE FUTURE

Production

In 2016, we expect to produce 16.0 million packaged pounds at Cigar Lake; our share is 8.0 million pounds.

62 CAMECO CORPORATION

In 2016, we also expect to:

•

extend the current surface freeze pad and advance planning for freeze plant infrastructure expansion to support future production

•

advance underground development according to the new mine plan and backfill drifts no longer required for underground freezing operations

•

continue ramping up towards the planned full annual production rate of 18 million pounds (100% basis) in 2017

Exploration

We are planning to conduct delineation drilling from surface to confirm and upgrade resources contained in the western portion of the deposit. Approximately 65,000 metres of diamond drilling is planned over a three-year period, starting in 2016, in order to complete a detailed geological and geotechnical interpretation, a resource estimate, and a technical study for the western portion of the deposit.

Rampup schedule

In 2017, we expect to reach full annual production of 18 million pounds (100% basis, 9 million pounds our share).

The McClean Lake mill’s operating licence currently has an annual production limit of 13 million pounds. AREVA has submitted an application to the CNSC to increase the mill’s licensed annual production limit; our 2016 and 2017 production outlook for Cigar Lake is therefore subject to AREVA securing the regulatory approvals necessary to increase mill production.

MANAGING OUR RISKS

Cigar Lake is a challenging deposit to develop and mine. These challenges include control of groundwater, weak rock formations, radiation protection, water inflow, regulatory approvals, surface and underground fires and other mining-related challenges. To reduce this risk, we are applying our operational experience and the lessons we have learned about water inflows at McArthur River and Cigar Lake.

Limited mining experience of the deposit

Although we have now successfully mined a number of cavities, these may not be representative of the deposit as a whole. As we ramp up production, there may be some technical challenges, which could affect our production plans, including, but not limited to, variable or unanticipated ground conditions, ground movement and cave-ins, water inflows and variable dilution, recovery values, and mining productivity. There is a risk that the rampup to full production may take longer than planned and that the full production rate may not be achieved on a sustained and consistent basis. We are confident we will be able to solve challenges that may arise, but failure to do so would have a significant impact on our business.

Ground freezing

To manage our risks and meet our production schedule, the areas being mined must meet specific ground freezing requirements before we begin jet boring. We have identified greater variation of the freeze rates of different geological formations encountered in the mine, based on new information obtained through surface freeze drilling. As a mitigation measure, we have increased the site freeze capacity to facilitate the extraction of ore cavities as planned.

Mill modifications

There is a risk to our plan to achieve the full production rate of 18 million pounds per year in 2017 if AREVA is unable to complete and commission the required mill modification and expansion on schedule. We are working closely with AREVA to understand and help mitigate the risks to ensure that mine and mill production schedules are aligned.

Mill licence increase approval

The McClean Lake mill’s current annual operating licence is limited to 13 million pounds. AREVA has submitted an application to the CNSC to increase the mill’s licensed annual production limit to 24 million pounds. There is a risk to our 2016 production plan, and to our plan to achieve the full production rate of 18 million pounds per year in 2017, if AREVA is unable to secure the regulatory approvals necessary to increase mill production.

2015 Annual Report 63

Labour relations

The current collective agreement between AREVA and unionized employees at the McClean Lake operation expires in May 2016. There is risk to our 2016 and 2017 production outlook for Cigar Lake if AREVA is unable to reach an agreement and there is a labour dispute.

Water inflow risk

A significant risk to development and production is from water inflows. The 2006 and 2008 water inflows were significant setbacks.

The consequences of another water inflow at Cigar Lake would depend on its magnitude, location and timing, but could include a significant delay or disruption in Cigar Lake production, a material increase in costs or a loss of mineral reserves.

We take the following steps to reduce the risk of inflows, but there is no guarantee that these will be successful:

•

Bulk freezing: Two of the primary challenges in mining the deposit are control of groundwater and ground support. Bulk freezing reduces but does not completely eliminate the risk of water inflows.

•

Pumping capacity and treatment limits: We have pumping capacity to meet our standard for this project of at least one and a half times the estimated maximum inflow.

We believe we have sufficient pumping, water treatment and surface storage capacity to handle the estimated maximum inflow.

We also manage the risks listed on pages 52 to 53.

64 CAMECO CORPORATION

Uranium – operating properties

Inkai

2015 Production (our share)

3.4M lbs

2016 Production Outlook (our share)

3.0M lbs

Estimated Reserves (our share)

43.1M lbs

Estimated Mine Life

2030 (based on licence term)

Inkai is a very significant uranium deposit, located in Kazakhstan. There are two production areas (blocks 1 and 2) and an exploration area (block 3). The operator is joint venture Inkai limited liability partnership, which we jointly own (60%) with Kazatomprom (40%).

Inkai is one of our three material uranium properties.


Location		South Kazakhstan
Ownership		60%
Mine type		In situ recovery (ISR)
End product		Uranium concentrates
Certifications		BSI OHSAS 18001 ISO 14001 certified
Estimated reserves		43.1 million pounds (proven and probable), average grade U₃O₈: 0.07%
Estimated resources		30.3 million pounds (indicated), average grade U₃O₈: 0.08% 144.3 million pounds (inferred), average grade U₃O₈: 0.05%
Licensed capacity (wellfields)		5.2 million pounds per year (our share 3.0 million pounds per year)
Licence term		Block 1: 2024, Block 2: 2030
Total production: 2009 to 2015		31.8 million pounds (100% basis)
2015 production		3.4 million pounds (5.8 million pounds on 100% basis)
2016 production outlook		3.0 million pounds (5.2 million pounds on 100% basis)
Estimated decommissioning cost (100% basis)		$9 million (US) (100% basis)

All values shown, including reserves and resources, represent our share only, unless indicated.

2015 UPDATE

Production

Total production from Inkai was 5.8 million pounds; our share was 3.4 million pounds. Production was 17% higher than our production in 2014. During 2015, the subsoil use law in Kazakhstan was amended to allow producers to produce within 20% (above or below) their licensed capacity in a year. As a result, Inkai produced 5.8 million pounds in 2015, 11% higher than its licensed capacity. The increase in production was the result of a higher head grade and an increase in wellfield development efficiency compared to 2014.

Project funding

As of December 31, 2015, Inkai had fully repaid the outstanding loan under our agreement to fund its project development costs related to blocks 1 and 2. In 2015, Inkai paid the remaining $0.8 million (US) in interest on the loan and repaid $55 million (US) of principal.

2015 Annual Report 65

We are currently advancing funds for Inkai’s work on block 3 and, as of December 31, 2015, the principal amounted to $148 million (US). Under the loan agreement, Inkai is to repay Cameco from the net sales proceeds from the sale of production from block 3.

Production expansion

In 2012, we entered into a binding memorandum of agreement (2012 MOA) with our joint venture partner, Kazatomprom, setting out a framework to:

•

increase Inkai’s annual production from blocks 1 and 2 to 10.4 million pounds (our share 5.2 million pounds) and sustain it at that level

•

extend the term of Inkai’s resource use contract through 2045

Kazatomprom is pursuing a strategic objective to develop uranium processing capacity in Kazakhstan to complement its leading uranium mining operations. Their primary focus is now on uranium refining, which is an intermediate step in the uranium conversion process. A Nuclear Co-operation Agreement between Canada and Kazakhstan is in place, providing the international framework necessary for applying to the two governments for the required licences and permits. We expect to pursue further expansion of production at Inkai at a pace measured to market opportunities. Discussions continue with Kazatomprom.

Block 3 exploration

In 2015, Inkai completed construction of the test leach facility and began pilot production from test wellfields, as well as advancing work on a preliminary appraisal of the mineral potential of block 3 according to Kazakhstan standards.

PLANNING FOR THE FUTURE

Production

We expect total production from blocks 1 and 2 to be 5.2 million pounds in 2016; our share is 3.0 million pounds. We expect to maintain production at this level until the potential growth plans are finalized with Kazatomprom.

Block 3 exploration

In 2016, Inkai expects to continue with pilot production from the test leach facility and to continue working on a final appraisal of the mineral potential according to Kazakhstan standards.

MANAGING OUR RISKS

Block 3 licence extension

The block 3 test leach facility is now operational and state commissioning of the test wellfields was accomplished during 2015. Our application for an extension of the block 3 evaluation period is still pending final approval from the Ministry of Energy of the Republic of Kazakhstan. Inkai continues working on the final appraisal of the mineral potential of block 3 according to Kazakhstan standards. Although a number of extensions of the licence term have been granted by Kazakh regulatory authorities in the past, there is no assurance that a further extension will be granted. Without such extension, there is a risk we could lose our rights to block 3, and a risk we will not be compensated for the funds we advanced to Inkai to fund block 3 activities.

Political risk

Kazakhstan declared itself independent in 1991 after the dissolution of the Soviet Union. Our Inkai investment and plans to increase production are subject to the risks associated with doing business in developing countries, which have significant potential for social, economic, political, legal and fiscal instability. Kazakh laws and regulations are complex and still developing and their application can be difficult to predict. To maintain and increase Inkai production, we need ongoing support, agreement and co-operation from our partner and the government.

The principal legislation governing subsoil exploration and mining activity in Kazakhstan is the Subsoil Use Law dated June 24, 2010, as amended (new subsoil law). It replaces the Law on the Subsoil and Subsoil Use, dated January 27, 1996.

66 CAMECO CORPORATION

In general, Inkai’s licences are governed by the version of the subsoil law that was in effect when the licences were issued in April 1999, and new legislation applies to Inkai only if it does not worsen Inkai’s position. Changes to legislation related to national security, among other criteria, however, are exempt from the stabilization clause in the resource use contract. The Kazakh government interprets the national security exemption broadly.

With the new subsoil law, the government continues to weaken its stabilization guarantee. The government is broadly applying the national security exception to encompass security over strategic national resources.

The resource use contract contains significantly broader stabilization provisions than the new subsoil law, and these contract provisions currently apply to us.

To date, the new subsoil law has not had a significant impact on Inkai. We continue to assess the impact. See our annual information form for an overview of this change in law.

We also manage the risks listed on pages 52 to 53.

2015 Annual Report 67

Uranium – operating properties

Rabbit Lake

2015 Production

4.2M lbs

2016 Production Outlook

3.6M lbs

Estimated Reserves

11.9M lbs

LOGO

The Rabbit Lake operation, which opened in 1975, is the longest operating uranium production facility in North America, and the second largest uranium mill in the world.


Location		Saskatchewan, Canada
Ownership		100%
End product		Uranium concentrates
ISO certification		ISO 14001 certified
Mine type		Underground
Estimated reserves		11.9 million pounds (proven and probable), average grade U₃O₈: 0.59%
Estimated resources		26.7 million pounds (indicated), average grade U₃O₈: 0.86%
		33.7 million pounds (inferred), average grade U₃O₈: 0.58%
Mining methods		Vertical blasthole stoping
Licensed capacity		Mill: maximum 16.9 million pounds per year; currently 11 million
Licence term		Through October, 2023
Total production: 1975 to 2015		202.2 million pounds
2015 production		4.2 million pounds
2016 production outlook		3.6 million pounds
Estimated decommissioning cost		$203 million

2015 UPDATE

Production

Production this year was unchanged from our 2014 production as a result of planned timing of production stopes, coupled with slightly improved ore grades.

Development and production continued at the Eagle Point mine. At the mill, we continued to improve the efficiency of the mill operation schedule.

Temporary mining restrictions

On December 17, 2015, we announced that underground mining activities at Eagle Point were being restricted due to a rock fall in an inactive area of the mine. As a precautionary measure, non-essential personnel were removed from the mine while the condition of the affected area was evaluated. Mine production was suspended, although milling of previously mined and transported ore continued through to year end.

The assessment determined that repairs were necessary to support the ground in the affected area of the mine. The repairs were completed, along with some further assessment of stability in other areas of the mine. The mine was reopened and normal operations resumed on February 3, 2016.

68 CAMECO CORPORATION

Impairment

PLANNING FOR THE FUTURE

Production

We expect to produce 3.6 million pounds in 2016. The decrease compared to 2015 is the result of the restriction of mining activities at the end of 2015, which extended into 2016.

Tailings capacity

Under our current licence, we expect to have sufficient tailings capacity to support milling of Eagle Point ore until about late 2017, based upon expected ore tonnage, milling rates and tailings properties.

Our plan for fully utilizing the available tailings capacity of the Rabbit Lake In-Pit Tailings Management facility requires regulatory approval in 2016 for which we have submitted the required applications. With these regulatory approvals and after we complete the necessary work on the existing pit, we expect to then have sufficient tailings capacity to support milling of Eagle Point ore until at least 2021 based upon expected ore tonnage, milling rates, and tailings properties.

Exploration

We plan to continue our underground drilling reserve replacement program in areas of interest north and northeast of the current mine workings in 2016. The drilling will be carried out from underground locations.

Reclamation

As part of our multi-year site-wide reclamation plan, we spent over $0.7 million in 2015 to reclaim facilities that are no longer in use and plan to spend over $0.5 million in 2016.

MANAGING OUR RISKS

We manage the risks listed on pages 52 to 53.

2015 Annual Report 69

Uranium – operating properties

Smith Ranch-Highland & Satellite Facilities

2015 Production

1.4M lbs

2016 Production Outlook

1.2M lbs

Estimated Reserves

8.0M lbs

LOGO

We operate Smith Ranch and Highland as a combined operation. Each has its own processing facility, but the Smith Ranch central plant currently processes all the uranium, including uranium from satellite facilities. The Highland plant is currently idle. Together, they form the largest uranium production facility in the United States.


Location		Wyoming, US
Ownership		100%
End product		Uranium concentrates
ISO certification		ISO 14001 certified
Estimated reserves	Smith Ranch-Highland:	6.2 million pounds (proven and probable), average grade U₃O₈: 0.09%
Estimated reserves	North Butte-Brown Ranch:	1.8 million pounds (proven and probable), average grade U₃O₈: 0.08%
Estimated resources	Smith Ranch-Highland:	19.8 million pounds (measured and indicated), average grade U₃O₈: 0.06%
		7.7 million pounds (inferred), average grade U₃O₈: 0.05%
	North Butte-Brown Ranch	8.8 million pounds (measured and indicated), average grade U₃O₈: 0.07%
		0.4 million pounds (inferred), average grade U₃O₈: 0.07%
Mining methods		In situ recovery (ISR)
Licensed capacity		Wellfields: 3 million pounds per year
Licensed capacity		Processing plants: 5.5 million pounds per year, including Highland mill
Licence term		Pending renewal – see Production below
Total production: 2002 to 2015		21.8 million pounds
2015 production		1.4 million pounds
2016 production outlook		1.2 million pounds
Estimated decommissioning cost		Smith Ranch-Highland: $206 million (US), North Butte: $22 million (US)

2015 UPDATE

Production

We met our forecast for the year although, as planned, production was 33% lower than in 2014, with new mine units and the North Butte satellite contributing to production at Smith Ranch-Highland in 2015.

The regulators continue to review our licence renewal application. We are allowed to continue with all previously approved activities during the licence renewal process.

PLANNING FOR THE FUTURE

Production

In 2016, we expect to produce 1.2 million pounds. The continued decrease is a result of market conditions, which led us to defer some wellfield development.

MANAGING OUR RISKS

We manage the risks listed on pages 52 to 53.

70 CAMECO CORPORATION

Uranium – operating properties

Crow Butte

2015 Production

0.4M lbs

2016 Production Outlook

0.2M lbs

Estimated Reserves

0.7M lbs

LOGO

Crow Butte was discovered in 1980 and began production in 1991.


Location		Nebraska, US
Ownership		100%
End product		Uranium concentrates
ISO certification		ISO 14001 certified
Estimated reserves		0.7 million pounds (proven), average grade U₃O₈: 0.08%
Estimated resources		15.2 million pounds (measured and indicated), average grade U₃O₈: 0.25%
		2.9 million pounds (inferred), average grade U₃O₈: 0.12%
Mining methods		In situ recovery (ISR)
Licensed capacity (processing plants and wellfields)		2.0 million pounds per year
Licence term		Through October, 2024
Total production: 2002 to 2015		10.1 million pounds
2015 production		0.4 million pounds
2016 production outlook		0.2 million pounds
Estimated decommissioning cost		$46 million (US)

2015 UPDATE

Production

Production this year was higher than forecast, but 33% lower than 2014 due to declining head grade.

PLANNING FOR THE FUTURE

Production

In 2016, we expect to produce 0.2 million pounds. The head grade and overall production at Crow Butte is expected to continue to decline, as there are no new wellfields being developed under the current mine plan.

MANAGING OUR RISKS

We manage the risks listed on pages 52 to 53.

2015 Annual Report 71

Uranium – projects under evaluation

Work on our projects under evaluation has been scaled back and will continue at a pace aligned with market signals.

Millennium


Location		Saskatchewan, Canada
Ownership		69.9%
End product		Uranium concentrates
Potential mine type		Underground
Estimated resources (our share)		53.0 million pounds (indicated), average grade U₃O₈: 2.39%
		20.2 million pounds (inferred), average grade U₃O₈: 3.19%

BACKGROUND

The Millennium deposit was discovered in 2000, and was delineated through geophysical survey and drilling work between 2000 and 2013. In 2012, we paid $150 million to acquire AREVA’s 27.94% interest in the project, bringing our interest in the project to 69.9%. We are the operator.

Yeelirrie


Location		Western Australia
Ownership		100%
End product		Uranium concentrates
Potential mine type		Open pit
Estimated resources		127.3 million pounds (measured and indicated), average grade U₃O₈: 0.16%

BACKGROUND

In 2012, we paid $430 million (US) (as well as $22 million (US) in stamp duty) to acquire the Yeelirrie uranium deposit. The deposit was discovered in 1972 and is a near-surface calcrete-style deposit that is amenable to open pit mining techniques. It is one of Australia’s largest undeveloped uranium deposits.

Kintyre


Location		Western Australia
Ownership		70%
End product		Uranium concentrates
Potential mine type		Open pit
Estimated resources (our share)		37.5 million pounds (indicated), average grade U₃O₈: 0.62%
		4.2 million pounds (inferred), average grade U₃O₈: 0.53%

BACKGROUND

In 2008, we paid $346 million (US) to acquire a 70% interest in Kintyre. In 2012, we recorded a $168 million write-down of the carrying value of our interest, due to a weakened uranium market. The Kintyre deposit is amenable to open pit mining techniques. We are the operator.

2015 PROJECT UPDATES

We believe that we have some of the best undeveloped uranium projects in the world. However, in the current market environment our primary focus is on uranium production and our tier-one assets. We continue to await a signal from the market that additional production is needed prior to making any new development decisions.

This year, on our projects under evaluation we:

•

continued studies to assess the technical, environmental and financial aspects of each project

•

at Kintyre and at other nearby regional exploration projects, we carried out further exploration work to test for potential satellite deposits. There were no significant results.

•

we received environmental approval for Kintyre and continued to advance Yeelirrie through the environmental assessment process

72 CAMECO CORPORATION

PLANNING FOR THE FUTURE

2016 Planned activity

At Millennium, no work is planned, as regulatory activity related to our final environmental impact statement continues to be on hold. Further progress towards a development decision is not expected until market conditions improve.

At Yeelirrie, we plan to further advance the project through the environmental assessment process and continue working on proposals required under the Yeelirrie State Agreement. Under the State Agreement, the Western Australian Government provides a framework for the approval and development of the project. Detailed proposals for the development of a mine and related infrastructure must be submitted to the government for approval by June 20, 2018, in order to retain the tenements and titles for the Yeelirrie project.

At Kintyre and other nearby regional exploration projects, we expect to continue with further exploration work to test for potential satellite deposits.

MANAGING THE RISKS

For all of our projects under evaluation, we manage the risks listed on pages 52 to 53.

2015 Annual Report 73

Uranium – exploration and corporate development

Our exploration program is directed at replacing mineral reserves as they are depleted by our production, and ensuring our future growth. We have maintained an active program even during periods of weak uranium prices, which has helped us secure land with exploration and development prospects that are among the best in the world, mainly in Canada, Australia, Kazakhstan and the US. Globally, our land holdings total 1.6 million hectares (3.9 million acres). In northern Saskatchewan alone, we have direct interests in 600,000 hectares (1.5 million acres) of land covering many of the most prospective exploration areas of the Athabasca Basin. Many of our prospects are located close to our existing operations where we have established infrastructure and capacity to expand.

For properties that meet our investment criteria, we may partner with other companies through strategic alliances, equity holdings and traditional joint venture arrangements. Our leadership position and industry expertise in both exploration and corporate social responsibility make us a partner of choice.

In 2015, we continued our exploration strategy of focusing on the most prospective projects in our portfolio. Exploration is key to ensuring our long-term growth.

LOGO

2015 UPDATE

Brownfield exploration

Brownfield exploration is uranium exploration near our existing operations, and includes expenses for advanced exploration projects where uranium mineralization is being defined.

This year, we spent $2 million on four brownfield exploration projects, $4 million on our projects under evaluation in Australia, and $2 million at Inkai and our US operations.

Regional exploration

We spent about $32 million on regional exploration programs (including support costs), primarily in Saskatchewan and Australia.

PLANNING FOR THE FUTURE

We plan to maintain an active uranium exploration program and continue to focus on our core projects in Saskatchewan under our long-term exploration strategy.

Brownfield exploration

In 2016, we plan to spend approximately $5 million on brownfield exploration and $4 million on projects under evaluation.

Regional exploration

We plan to spend about $36 million on 24 projects in Canada and Australia, the majority of which are at drill target stage. Among the larger expenditures planned is $7 million on the Read Lake project, which is adjacent to McArthur River in Saskatchewan. We will also spend a total of $2 million at Inkai and in the US.

74 CAMECO CORPORATION

ACQUISITION PROGRAM

We have a dedicated team looking for acquisition opportunities within the nuclear fuel cycle that could further add to our supply, support our sales activities, and complement and enhance our business in the nuclear industry. We will invest when an opportunity is available at the right time and the right price. We strive to pursue corporate development initiatives that will leave us and our shareholders in a fundamentally stronger position.

An acquisition opportunity is never assessed in isolation. Acquisitions must compete for investment capital with our own internal growth opportunities. They are subject to our capital allocation process described in the strategy section, starting on page 14. Currently, given the conditions in the uranium market, and our extensive portfolio of reserves and resources, our focus is on our tier-one assets. We expect that these assets will allow us to meet rising uranium demand with increased production from our best margin operations, and will help to mitigate risk in the event of prolonged uncertainty.

2015 Annual Report 75

Fuel services

Refining, conversion and fuel manufacturing

We control about 20% of world UF₆ conversion capacity and are a supplier of natural UO₂. Our focus is on cost-competitiveness and operational efficiency.

Our fuel services segment is strategically important because it helps support the growth of the uranium segment. Offering a range of products and services to customers helps us broaden our business relationships and expand our uranium market share.

Blind River Refinery

Licensed Capacity

24.0M kgU of UO₃

Licence renewal in

Feb, 2022

Blind River is the world’s largest commercial uranium refinery, refining uranium concentrates from mines around the world into UO₃.


Location		Ontario, Canada
Ownership		100%
End product		UO₃
ISO certification		ISO 14001 certified
Licensed capacity		18.0 million kgU as UO₃ per year, approved to 24.0 million subject to completion of certain equipment upgrades (advancement depends on market conditions)
Licence term		Through February, 2022
Estimated decommissioning cost		$39 million

76 CAMECO CORPORATION

Port Hope Conversion Services

Licensed Capacity

12.5M kgU of UF₆

2.8M kgU of UO₂

Licence renewal in

Feb, 2017

Port Hope is the only uranium conversion facility in Canada and a supplier of UO₂ for Canadian-made CANDU reactors.


Location		Ontario, Canada
Ownership		100%
End product		UF₆, UO₂
ISO certification		ISO 14001 certified
Licensed capacity		12.5 million kgU as UF₆ per year
		2.8 million kgU as UO₂ per year
Licence term		Through February, 2017
Estimated decommissioning cost		$102 million (an updated estimate is currently under regulatory review)

Cameco Fuel Manufacturing Inc. (CFM)

CFM produces fuel bundles and reactor components for CANDU reactors.


Location		Ontario, Canada
Ownership		100%
End product		CANDU fuel bundles and components
ISO certification		ISO 9001 certified, ISO 14001 certified
Licensed capacity		1.2 million kgU as UO₂ as finished bundles
Licence term		Through February, 2022
Estimated decommissioning cost		$20 million

2015 UPDATE

Production

Fuel services produced 9.7 million kgU, 16% lower than 2014. This was a result of our decision to decrease production in response to weak market conditions and the termination of our toll milling agreement with SFL in 2014.

Port Hope conversion facility cleanup and modernization (Vision in Motion)

The Vision in Motion project is currently in the feasibility stage and will continue with the CNSC licensing process in 2016, which is required to advance the project.

Labour relations

Approximately 100 unionized employees at Cameco Fuel Manufacturing Inc.’s operations in Port Hope and Cobourg, Ontario accepted a new collective bargaining agreement in the second quarter of 2015. The employees, represented by the United Steelworkers local 14193, agreed to a three-year contract that includes a 7% wage increase over the term of the agreement. The previous contract expired on June 1, 2015.

2015 Annual Report 77

PLANNING FOR THE FUTURE

Production

We have decreased our production target for 2016 to between 8 million and 9 million kgU in response to the continued weak market conditions.

Labour relations

The current collective bargaining agreement for our unionized employees at the Port Hope conversion facility expires on June 30, 2016. We will commence the bargaining process in early 2016.

Regulatory

The current operating licence for the Port Hope conversion facility expires in February 2017. The CNSC relicensing process will take place in 2016.

MANAGING OUR RISKS

We also manage the risks listed on pages 52 to 53.

78 CAMECO CORPORATION

NUKEM GmbH


Offices		Alzenau, Germany (Headquarters, NUKEM GmbH)
		Connecticut, US (Subsidiary, NUKEM Inc.)
Ownership		100%
Activity		Trading of uranium and uranium-related products
2015 sales¹		10.7 million pounds U₃O₈
2016 forecast sales		9 to 10 million pounds U₃O₈

¹	Includes sales of 0.9 million pounds and revenue of $19.3 million between our uranium, fuel services and NUKEM segments.

BACKGROUND

In 2013, we acquired NUKEM, one of the world’s leading traders of uranium and uranium-related products. On closing, we paid €107 million ($140 million (US)) and assumed NUKEM’s net debt of about €84 million ($111 million (US)).

NUKEM has access to contracted volumes and inventories in diverse geographic locations as well as scope for opportunistic trading of uranium and uranium-related products. This enables NUKEM to provide a wide range of solutions to its customers that may fall outside the scope of typical uranium sourcing and selling arrangements. Its trading strategy is nonspeculative and seeks to match quantities and pricing structures of its long-term supply and delivery contracts, minimizing exposure to commodity price fluctuations and locking in profit margins.

NUKEM’s main customers are commercial nuclear power plants using enriched uranium fuel, typically large utilities that are either government owned, or large-scale utilities with multibillion-dollar market capitalizations and strong credit ratings. NUKEM also trades with converters, enrichers, other traders and investors.

NUKEM’s business model

NUKEM’s purchase contracts are with long-standing supply partners and its sales contracts are with blue-chip utilities which have strong credit ratings.

MANAGING OUR RISKS

NUKEM manages the risks associated with trading and brokering nuclear fuels and services. It participates in the uranium spot market, making purchases to place material in higher price contracts. There are risks associated with these spot market purchases, including the risk of losses. NUKEM is also subject to counterparty risk of suppliers not meeting their delivery commitments and purchasers not paying for the product delivered. If a counterparty defaults on a payment or other obligation or becomes insolvent, this could significantly affect NUKEM’s contribution to our earnings, cash flows, financial condition or results of operations.

2015 Annual Report 79

Mineral reserves and resources

Our mineral reserves and resources are the foundation of our company and fundamental to our success.

We have interests in a number of uranium properties. The tables in this section show our estimates of the proven and probable reserves, and measured, indicated, and inferred resources at those properties. However, only three of the properties listed in those tables are material uranium properties for us: McArthur River/Key Lake, Cigar Lake and Inkai.

We estimate and disclose mineral reserves and resources in five categories, using the definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum, and in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101), developed by the Canadian Securities Administrators. You can find out more about these categories at www.cim.org.

About mineral resources

Mineral resources do not have demonstrated economic viability, but have reasonable prospects for eventual economic extraction. They fall into three categories: measured, indicated and inferred. Our reported mineral resources are exclusive of mineral reserves.

•

Measured and indicated mineral resources can be estimated with sufficient confidence to allow the appropriate application of technical, economic, marketing, legal, environmental, social and governmental factors to support evaluation of the economic viability of the deposit.

•

measured resources: we can confirm both geological and grade continuity to support detailed mine planning

•

indicated resources: we can reasonably assume geological and grade continuity to support mine planning

•

Inferred mineral resources are estimated using limited information. We do not have enough confidence to evaluate their economic viability in a meaningful way. You should not assume that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource, but it is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.

Our share of uranium in the following mineral resource tables is based on our respective ownership interests, except for Inkai which is based on our interest in potential production (57.5%), which differs from our ownership interest (60%). Mineral resources that are not mineral reserves have no demonstrated economic viability.

About mineral reserves

Mineral reserves are the economically mineable part of measured and/or indicated mineral resources demonstrated by at least a preliminary feasibility study. The reference point at which mineral reserves are defined is the point where the ore is delivered to the processing plant. Mineral reserves fall into two categories:

•

proven reserves: the economically mineable part of a measured resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified

•

probable reserves: the economically mineable part of a measured and/or indicated resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified

We use current geological models, constant dollar average uranium prices of $57 to $59 (US) per pound U₃O₈, and current or projected operating costs and mine plans to estimate our mineral reserves, allowing for dilution and mining losses. We apply our standard data verification process for every estimate.

Our share of uranium in the mineral reserves table below is based on our respective ownership interests, except for Inkai which is based on our interest in planned production (57.5%) assuming an annual production rate of 5.2 million pounds, which differs from our ownership interest (60%).

80 CAMECO CORPORATION

LOGO

Changes this year

Our share of proven and probable mineral reserves decreased from 429 million pounds U₃O₈ at the end of 2014, to 410 million pounds at the end of 2015. The change was primarily the result of production, which removed 30 million pounds from our mineral inventory. However, the decrease was partially offset due to the replacement of raiseboring with blasthole stoping in some areas of McArthur River, as well as additional information from drilling surface freeze holes at Cigar Lake, which both resulted in higher reserves when the related probable reserves were converted to proven reserves.

Measured and indicated mineral resources decreased from 379 million pounds U₃O₈ at the end of 2014, to 377 million pounds at the end of 2015. Our share of inferred mineral resources is 380 million pounds U₃O₈, an increase of 68 million pounds from the end of 2014. The variance in mineral resources was mainly the result of:

•

the addition of 4.5 million pounds U₃O₈ to indicated resources and 8 million pounds to inferred resources at Rabbit Lake from additional drilling, and from a revision to the equivalent grade formula

•

first time reporting for the Fox Lake deposit, on the Read Lake property near McArthur River, adding 53 million pounds U₃O₈ to inferred resources

•

the addition of 13 million pounds U₃O₈of inferred resources from the Gryphon deposit on the Wheeler River property

•

a revised pit shell defining the mineral resources at Kintyre

Qualified persons

The technical and scientific information discussed in this MD&A for our material properties (McArthur River/Key Lake, Cigar Lake and Inkai) was approved by the following individuals who are qualified persons for the purposes of NI 43-101:

MCARTHUR RIVER/KEY LAKE

•

Alain G. Mainville, director, mineral resources management, Cameco

•

David Bronkhorst, vice-president, mining and technology, Cameco

•

Baoyao Tang, technical superintendent, McArthur River, Cameco

CIGAR LAKE

•

Alain G. Mainville, director, mineral resources management, Cameco

•

Leslie Yesnik, general manager, Cigar Lake, Cameco

•

Scott Bishop, manager, technical services, Cameco

INKAI

•

Alain G. Mainville, director, mineral resources management, Cameco

•

Darryl Clark, general manager, JV Inkai

•

Lawrence Reimann, manager, technical services, Cameco Resources

•

Bryan Soliz, principal geologist, mineral resources management, Cameco

2015 Annual Report 81

Important information about mineral reserve and resource estimates

Although we have carefully prepared and verified the mineral reserve and resource figures in this document, the figures are estimates, based in part on forward-looking information.

Estimates are based on our knowledge, mining experience, analysis of drilling results, the quality of available data and management’s best judgment. They are, however, imprecise by nature, may change over time, and include many variables and assumptions, including:

•

geological interpretation

•

extraction plans

•

commodity prices and currency exchange rates

•

recovery rates

•

operating and capital costs

There is no assurance that the indicated levels of uranium will be produced, and we may have to re-estimate our mineral reserves based on actual production experience. Changes in the price of uranium, production costs or recovery rates could make it unprofitable for us to operate or develop a particular site or sites for a period of time. See page 2 for information about forward-looking information.

Please see our mineral reserves and resources section of our annual information form for the specific assumptions, parameters and methods used for McArthur River, Inkai and Cigar Lake mineral reserve and resource estimates.

Important information for US investors

While the terms measured, indicated and inferred mineral resources are recognized and required by Canadian securities regulatory authorities, the US Securities and Exchange Commission (SEC) does not recognize them. Under US standards, mineralization may not be classified as a ‘reserve’ unless it has been determined at the time of reporting that the mineralization could be economically and legally produced or extracted. US investors should not assume that:

•

any or all of a measured or indicated mineral resource will ever be converted into proven or probable mineral reserves

•

any or all of an inferred mineral resource exists or is economically or legally mineable, or will ever be upgraded to a higher category. Under Canadian securities regulations, estimates of inferred resources may not form the basis of feasibility or pre-feasibility studies. Inferred resources have a great amount of uncertainty as to their existence and economic and legal feasibility.

The requirements of Canadian securities regulators for identification of ‘reserves’ are also not the same as those of the SEC, and mineral reserves reported by us in accordance with Canadian requirements may not qualify as reserves under SEC standards.

Other information concerning descriptions of mineralization, mineral reserves and resources may not be comparable to information made public by companies that comply with the SEC’s reporting and disclosure requirements for US domestic mining companies, including Industry Guide 7.

82 CAMECO CORPORATION

Mineral reserves

As at December 31, 2015 (100% basis – only the shaded column shows our share)

PROVEN AND PROBABLE

(tonnes in thousands; pounds in millions)


		PROVEN						PROBABLE						TOTAL MINERAL RESERVES						OUR RESERVES CONTENT (LBS U₃O₈)		METALLURGICAL RECOVERY (%)
PROPERTY	MINING METHOD	TONNES		GRADE % U₃O₈		CONTENT (LBS U₃O₈)		TONNES		GRADE % U₃O₈		CONTENT (LBS U₃O₈)		TONNES		GRADE % U₃O₈		CONTENT (LBS U₃O₈)		OUR RESERVES CONTENT (LBS U₃O₈)		METALLURGICAL RECOVERY (%)
McArthur River	UG		1,195.3		9.62		253.5		199.8		18.84		83.0		1,395.1		10.94		336.5		234.9		98.7
Cigar Lake	UG		226.1		21.93		109.3		375.7		13.55		112.3		601.8		16.70		221.6		110.9		98.5
Rabbit Lake	UG		10.6		0.34		0.1		902.9		0.59		11.8		913.5		0.59		11.9		11.9		97.0
Key Lake	OP		61.1		0.52		0.7		—		—		—		61.1		0.52		0.7		0.6		98.7
Inkai	ISR		1,139.5		0.08		2.1		50,476.4		0.07		72.9		51,615.9		0.07		75.0		43.1		85.0
Smith Ranch-Highland	ISR		1,127.8		0.10		2.5		1,871.0		0.09		3.8		2,998.8		0.09		6.2		6.2		80.0
North Butte-Brown Ranch	ISR		644.2		0.08		1.2		373.8		0.08		0.7		1,018.0		0.08		1.8		1.8		60.0
Crow Butte	ISR		412.5		0.08		0.7		—		—		—		412.5		0.08		0.7		0.7		85.0

Total			4,817.2		—		370.1		54,199.5		—		284.4		59,016.7		—		654.5		410.2		—

(UG – underground, OP – open pit, ISR – in situ recovery, totals may not add up due to rounding.

Note that the estimates in the above table:

•

use constant dollar average uranium prices of $57 to $59 (US)/lb U₃O₈

•

are based on an average exchange rate of $1.00 US=$1.15 to $1.25 Cdn

We do not expect these mineral reserve estimates to be materially affected by metallurgical, environmental, permitting, legal, taxation, socio-economic, political, marketing or other relevant issues.

Metallurgical recovery

We report mineral reserves as the quantity of contained ore supporting our mining plans, and provide an estimate of the metallurgical recovery for each uranium property. The estimate of the amount of valuable product that can be physically recovered by the metallurgical extraction process is obtained by multiplying quantity of contained metal (content) by the planned metallurgical recovery percentage. The content and our share of uranium in the table above are before accounting for estimated metallurgical recovery.

2015 Annual Report 83

Mineral resources

As at December 31, 2015 (100% – only the shaded columns show our share)

MEASURED, INDICATED AND INFERRED

(tonnes in thousands; pounds in millions)


	MEASURED RESOURCES (M)						INDICATED RESOURCES (I)								OUR SHARE TOTAL M+I CONTENT (LBS U₃O₈)		INFERRED RESOURCES						OUR SHARE INFERRED CONTENT (LBS U₃O₈)
PROPERTY	TONNES		GRADE % U₃O₈		CONTENT (LBS U₃O₈)		TONNES		GRADE % U₃O₈		CONTENT (LBS U₃O₈)		TOTAL M+I CONTENT (LBS U₃O₈)		OUR SHARE TOTAL M+I CONTENT (LBS U₃O₈)		TONNES		GRADE % U3O8		CONTENT (LBS U₃O₈)		OUR SHARE INFERRED CONTENT (LBS U₃O₈)
McArthur River		62.0		3.83		5.2		4.8		3.02		0.3		5.6		3.9		344.2		7.72		58.6		40.9
Cigar Lake		2.7		6.06		0.4		17.5		7.59		2.9		3.3		1.6		284.7		16.43		103.1		51.6
Rabbit Lake		—		—		—		1,402.7		0.86		26.7		26.7		26.7		2,645.6		0.58		33.7		33.7
Millennium		—		—		—		1,442.6		2.39		75.9		75.9		53.0		412.4		3.19		29.0		20.2
Wheeler River		—		—		—		166.4		19.13		70.2		70.2		21.1		842.5		2.38		44.1		13.2
Fox Lake		—		—		—		—		—		—		—		—		386.7		7.99		68.1		53.3
Tamarack		—		—		—		183.8		4.42		17.9		17.9		10.3		45.6		1.02		1.0		0.6
Kintyre		—		—		—		3,897.7		0.62		53.5		53.5		37.5		517.1		0.53		6.0		4.2
Yeelirrie		24,013.5		0.17		92.4		12,626.5		0.13		34.9		127.3		127.3		—		—		—		—
Inkai		—		—		—		31,366.1		0.08		52.6		52.6		30.3		250,958.6		0.05		251.0		144.3

Smith Ranch-Highland		1,241.9		0.11		2.9		14,338.1		0.05		16.9		19.8		19.8		6,861.0		0.05		7.7		7.7
North Butte-Brown Ranch		232.6		0.08		0.4		5,530.3		0.07		8.4		8.8		8.8		294.5		0.07		0.4		0.4
Gas Hills-Peach		687.2		0.11		1.7		3,626.1		0.15		11.6		13.3		13.3		3,307.5		0.08		6.0		6.0
Crow Butte		1,418.2		0.21		6.6		1,354.9		0.29		8.6		15.2		15.2		1,135.2		0.12		2.9		2.9
Ruby Ranch		—		—		—		2,215.3		0.08		4.1		4.1		4.1		56.2		0.14		0.2		0.2
Shirley Basin		89.2		0.16		0.3		1,638.2		0.11		4.1		4.4		4.4		508.0		0.10		1.1		1.1

Total		27,747.4		—		109.9		79,811.2		—		388.7		498.5		377.2		268,599.9		—		613.0		380.5

Totals may not add up due to rounding.

Note that mineral resources:

•

do not include amounts that have been identified as mineral reserves

•

do not have demonstrated economic viability

84 CAMECO CORPORATION

Additional information

Due to the nature of our business, we are required to make estimates that affect the amount of assets and liabilities, revenues and expenses, commitments and contingencies we report. We base our estimates on our experience, our best judgment, guidelines established by the Canadian Institute of Mining, Metallurgy and Petroleum and on assumptions we believe are reasonable.

We believe the following critical accounting estimates reflect the more significant judgments used in the preparation of our financial statements. These estimates affect all of our segments, unless otherwise noted.

Decommissioning and reclamation

In our uranium and fuel services segments, we are required to estimate the cost of decommissioning and reclamation for each operation, but we normally do not incur these costs until an asset is nearing the end of its useful life. Regulatory requirements and decommissioning methods could change during that time, making our actual costs different from our estimates. A significant change in these costs or in our mineral reserves could have a material impact on our net earnings and financial position. See note 17 to the financial statements.

Property, plant and equipment

We depreciate property, plant and equipment primarily using the unit-of-production method, where the carrying value is reduced as resources are depleted. A change in our mineral reserves would change our depreciation expenses, and such a change could have a material impact on amounts charged to earnings.

We assess the carrying values of property, plant and equipment and goodwill every year, or more often if necessary. If we determine that we cannot recover the carrying value of an asset or goodwill, we write off the unrecoverable amount against current earnings. We base our assessment of recoverability on assumptions and judgments we make about future prices, production costs, our requirements for sustaining capital and our ability to economically recover mineral reserves. A material change in any of these assumptions could have a significant impact on the potential impairment of these assets.

In performing impairment assessments of long-lived assets, assets that cannot be assessed individually are grouped together into the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Management is required to exercise judgment in identifying these cash generating units.

Taxes

When we are preparing our financial statements, we estimate taxes in each jurisdiction we operate in, taking into consideration different tax rates, non-deductible expenses, valuation of deferred tax assets, changes in tax laws and our expectations for future results.

We base our estimates of deferred income taxes on temporary differences between the assets and liabilities we report in our financial statements, and the assets and liabilities determined by the tax laws in the various countries we operate in. We record deferred income taxes in our financial statements based on our estimated future cash flows, which includes estimates of non-deductible expenses. If these estimates are not accurate, there could be a material impact on our net earnings and financial position.

Commencement of production stage

When we determine that a mining property has reached the production stage, capitalization of development ceases, and depreciation of the mining property begins and is charged to earnings. Production is reached when management determines that the mine is able to produce at a consistent or sustainably increasing level. This determination is a matter of judgment. See note 2 to the financial statements for further information on the criteria that we used to make this assessment.

2015 Annual Report 85

Purchase price allocations

The purchase price related to a business combination or asset acquisition is allocated to the underlying acquired assets and liabilities based on their estimated fair values at the time of acquisition. The determination of fair value requires us to make assumptions, estimates and judgments regarding future events. The allocation process is inherently subjective and impacts the amounts assigned to individually identifiable assets and liabilities. As a result, the purchase price allocation impacts our reported assets and liabilities and future net earnings due to the impact on future depreciation and amortization expense and impairment tests.

Determination of joint control

We conduct certain operations through joint ownership interests. Judgment is required in assessing whether we have joint control over the investee, which involves determining the relevant activities of the arrangement and whether decisions around relevant activities require unanimous consent. Judgment is also required to determine whether a joint arrangement should be classified as a joint venture or joint operation. Classifying the arrangement requires us to assess our rights and obligations arising from the arrangement. Specifically, management considers the structure of the joint arrangement and whether it is structured through a separate vehicle. When structured through a separate vehicle, we also consider the rights and obligations arising from the legal form of the separate vehicle, the terms of the contractual arrangements and other facts and circumstances, when relevant. This judgment influences whether we equity account or proportionately consolidate our interest in the arrangement.

Controls and procedures

We have evaluated the effectiveness of our disclosure controls and procedures and internal control over financial reporting as of December 31, 2015, as required by the rules of the US Securities and Exchange Commission and the Canadian Securities Administrators.

Management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), supervised and participated in the evaluation, and concluded that our disclosure controls and procedures are effective to provide a reasonable level of assurance that the information we are required to disclose in reports we file or submit under securities laws is recorded, processed, summarized and reported accurately, and within the time periods specified. It should be noted that, while the CEO and CFO believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect the disclosure controls and procedures or internal control over financial reporting to be capable of preventing all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Management, including our CEO and our CFO, is responsible for establishing and maintaining internal control over financial reporting and conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2015. We have not made any change to our internal control over financial reporting during the 2015 fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

New standards and interpretations not yet adopted

A number of new standards and amendments to existing standards are not yet effective for the year ended December 31, 2015, and have not been applied in preparing these consolidated financial statements. Cameco does not intend to early adopt any of the following amendments to existing standards and does not expect the amendments to have a material impact on the financial statements, unless otherwise noted.

IFRS 15, Revenue from Contracts with Customers (IFRS 15) – In May 2014, the IASB issued IFRS 15 which is effective for periods beginning on or after January 1, 2018 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. The extent of the impact of adoption of IFRS 15 has not yet been determined.

86 CAMECO CORPORATION

IFRS 9, Financial Instruments (IFRS 9) – In July 2014, the IASB issued IFRS 9. IFRS 9 replaces the existing guidance in IAS 39, Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 includes revised guidance on the classification and measurement of financial assets, a new expected credit loss model for calculating impairment on financial assets and new hedge accounting requirements. It also carries forward, from IAS 39, guidance on recognition and derecognition of financial instruments.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption of the new standard permitted. Cameco does not intend to early adopt IFRS 9. The extent of the impact of adoption of IFRS 9 has not yet been determined.

IFRS 16, Leases (IFRS 16) – In January 2016, the IASB issued IFRS 16 which is effective for periods beginning on or after January 1, 2019, with early adoption permitted. IFRS 16 eliminates the current dual model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. The extent of the impact of adoption of IFRS 16 has not yet been determined.

2015 Annual Report 87

LOGO

Cameco Corporation

2015 consolidated financial statements

February 4, 2016

88 CAMECO CORPORATION

Report of management’s accountability

The accompanying consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Management is responsible for ensuring that these statements, which include amounts based upon estimates and judgments, are consistent with other information and operating data contained in the annual financial review and reflect the corporation’s business transactions and financial position.

Management is also responsible for the information disclosed in the management’s discussion and analysis including responsibility for the existence of appropriate information systems, procedures and controls to ensure that the information used internally by management and disclosed externally is complete and reliable in all material respects.

In addition, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. The internal control system includes an internal audit function and a code of conduct and ethics, which is communicated to all levels in the organization and requires all employees to maintain high standards in their conduct of the corporation’s affairs. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company’s assets are appropriately accounted for and adequately safeguarded. Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s system of internal control over financial reporting was effective as at December 31, 2015.

KPMG LLP has audited the consolidated financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).

The board of directors annually appoints an audit and finance committee comprised of directors who are not employees of the corporation. This committee meets regularly with management, the internal auditor and the shareholders’ auditors to review significant accounting, reporting and internal control matters. Both the internal and shareholders’ auditors have unrestricted access to the audit and finance committee. The audit and finance committee reviews the consolidated financial statements, the report of the shareholders’ auditors, and management’s discussion and analysis and submits its report to the board of directors for formal approval.


Original signed by Tim S. Gitzel		Original signed by Grant E. Isaac
President and Chief Executive Officer		Senior Vice-President and Chief Financial Officer
February 4, 2016		February 4, 2016

2015 Annual Report 89

Independent auditors’ report

To the Shareholders and Board of Directors of Cameco Corporation:

We have audited the accompanying consolidated financial statements of Cameco Corporation, which comprise the consolidated statements of financial position as at December 31, 2015 and December 31, 2014, the consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Cameco Corporation as at December 31, 2015 and December 31, 2014 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Original signed by KPMG LLP

Chartered Professional Accountants

February 4, 2016

Saskatoon, Canada

90 CAMECO CORPORATION

Consolidated statements of earnings


For the years ended December 31	Note	2015			2014
($Cdn thousands, except per share amounts)	Note	2015			2014
Revenue from products and services		$	2,754,378		$	2,397,532

Cost of products and services sold			1,744,815			1,420,768
Depreciation and amortization			312,518			338,983

Cost of sales			2,057,333			1,759,751

Gross profit			697,045			637,781
Administration			186,810			176,385
Impairment charges	9, 12		215,488			326,693
Exploration			40,259			46,565
Research and development			6,587			5,044
Loss on disposal of assets	9		2,326			44,762

Earnings from operations			245,575			38,332
Finance costs	20		(103,615	)		(111,853	)
Loss on derivatives	27		(280,610	)		(121,160	)
Finance income			5,417			7,402
Share of loss from equity-accounted investees	12		(758	)		(17,141	)
Other income	21		54,723			85,322

Loss before income taxes			(79,268	)		(119,098	)
Income tax recovery	22		(142,630	)		(175,268	)

Net earnings from continuing operations			63,362			56,170
Net earnings from discontinued operation	6		—			127,243

Net earnings		$	63,362		$	183,413

Equity holders			65,286			185,234
Non-controlling interest			(1,924	)		(1,821	)

Net earnings		$	63,362		$	183,413

Continuing operations			0.16			0.15
Discontinued operation			—			0.32

Total basic earnings per share	23	$	0.16		$	0.47

Continuing operations			0.16			0.15
Discontinued operation			—			0.32

Total diluted earnings per share	23	$	0.16		$	0.47

See accompanying notes to consolidated financial statements.

2015 Annual Report 91

Consolidated statements of comprehensive income


For the years ended December 31	Note	2015			2014
($Cdn thousands)	Note	2015			2014
Net earnings		$	63,362		$	183,413

Other comprehensive income (loss), net of taxes:	22
Items that will not be reclassified to net earnings:
Remeasurements of defined benefit liability			2,015			(7,952	)
Items that are or may be reclassified to net earnings:
Exchange differences on translation of foreign operations			182,089			58,890
Gains on derivatives designated as cash flow hedges transferred to net earnings - discontinued operation			—			(300	)
Unrealized gains on available-for-sale assets			22			(613	)
Losses on available-for-sale assets transferred to earnings			—			2

Other comprehensive income, net of taxes			184,126			50,027

Total comprehensive income		$	247,488		$	233,440

Comprehensive income from continuing operations			247,488			106,497
Comprehensive income from discontinued operation	6		—			126,943

Total comprehensive income		$	247,488		$	233,440

Other comprehensive income (loss) attributable to:

Equity holders		$	184,288		$	49,969
Non-controlling interest			(162	)		58

Other comprehensive income for the year		$	184,126		$	50,027

Total comprehensive income (loss) attributable to:

Equity holders		$	249,574		$	235,203
Non-controlling interest			(2,086	)		(1,763	)

Total comprehensive income for the year		$	247,488		$	233,440

See accompanying notes to consolidated financial statements.

92 CAMECO CORPORATION

Consolidated statements of financial position


As at December 31	Note	2015			2014
($Cdn thousands)	Note	2015			2014
Assets
Current assets
Cash and cash equivalents		$	458,604		$	566,583
Accounts receivable	7		246,865			455,002
Current tax assets			493			3,096
Inventories	8		1,285,266			902,278
Supplies and prepaid expenses			180,544			130,406
Current portion of long-term receivables, investments and other	11		12,193			10,341

Total current assets			2,183,965			2,067,706

Property, plant and equipment	9		5,228,160			5,291,021
Goodwill and intangible assets	10		217,130			201,102
Long-term receivables, investments and other	11		449,236			423,280
Investments in equity-accounted investees	12		2,472			3,230
Deferred tax assets	22		713,674			486,328

Total non-current assets			6,610,672			6,404,961

Total assets		$	8,794,637		$	8,472,667

Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	13	$	317,856		$	316,258
Current tax liabilities			56,494			51,719
Dividends payable			39,579			39,579
Current portion of other liabilities	16		241,113			87,883
Current portion of provisions	17		16,595			20,375

Total current liabilities			671,637			515,814

Long-term debt	15		1,492,237			1,491,198
Other liabilities	16		132,142			172,034
Provisions	17		918,163			825,935
Deferred tax liabilities	22		35,179			23,882

Total non-current liabilities			2,577,721			2,513,049

Shareholders’ equity
Share capital			1,862,646			1,862,646
Contributed surplus			209,115			196,815
Retained earnings			3,241,902			3,333,099
Other components of equity			233,357			51,084

Total shareholders’ equity attributable to equity holders			5,547,020			5,443,644

Non-controlling interest			(1,741	)		160

Total shareholders’ equity			5,545,279			5,443,804

Total liabilities and shareholders’ equity		$	8,794,637		$	8,472,667

Commitments and contingencies [notes 9, 17, 22]

See accompanying notes to consolidated financial statements.

2015 Annual Report 93

Consolidated statements of changes in equity


	Attributable to equity holders
($Cdn thousands)	Share capital		Contributed surplus			Retained earnings			Foreign currency translation			Cash flow hedges			Available- for-sale assets			Total			Non- controlling interest			Total equity
Balance at January 1, 2015	$	1,862,646	$	196,815		$	3,333,099		$	51,667		$	—		$	(583	)	$	5,443,644		$	160		$	5,443,804

Net earnings (loss)		—		—			65,286			—			—			—			65,286			(1,924	)		63,362
Other comprehensive income (loss)		—		—			2,015			182,251			—			22			184,288			(162	)		184,126

Total comprehensive income (loss)		—		—			67,301			182,251			—			22			249,574			(2,086	)		247,488

Share-based compensation		—		16,853			—			—			—			—			16,853			—			16,853
Share options exercised		—		(4,553	)		—			—			—			—			(4,553	)		—			(4,553	)
Change in ownership interest in subsidiary		—		—			(185	)		—			—			—			(185	)		185			—
Dividends		—		—			(158,313	)		—			—			—			(158,313	)		—			(158,313	)

Balance at December 31, 2015	$	1,862,646	$	209,115		$	3,241,902		$	233,918		$	—		$	(561	)	$	5,547,020		$	(1,741	)	$	5,545,279

Balance at January 1, 2014	$	1,854,671	$	186,382		$	3,314,049		$	(7,165	)	$	300		$	28		$	5,348,265		$	1,129		$	5,349,394

Net earnings (loss)		—		—			185,234			—			—			—			185,234			(1,821	)		183,413
Other comprehensive income (loss)		—		—			(7,952	)		58,832			(300	)		(611	)		49,969			58			50,027

Total comprehensive income (loss)		—		—			177,282			58,832			(300	)		(611	)		235,203			(1,763	)		233,440

Share-based compensation		—		15,808			—			—			—			—			15,808			—			15,808
Share options exercised		7,975		(5,375	)		—			—			—			—			2,600			—			2,600
Dividends		—		—			(158,232	)		—			—			—			(158,232	)		—			(158,232	)
Transactions with owners - contributed equity		—		—			—			—			—			—			—			794			794

Balance at December 31, 2014	$	1,862,646	$	196,815		$	3,333,099		$	51,667		$	—		$	(583	)	$	5,443,644		$	160		$	5,443,804

See accompanying notes to consolidated financial statements.

94 CAMECO CORPORATION

Consolidated statements of cash flows


For the years ended December 31 ($Cdn thousands)	Note	2015			2014
Operating activities
Net earnings		$	63,362		$	183,413
Adjustments for:
Depreciation and amortization			312,518			338,983
Deferred charges			5,834			61,869
Unrealized loss on derivatives			92,166			40,569
Share-based compensation	25		16,853			15,808
Loss on sale of assets			2,326			44,762
Finance costs	20		103,615			111,853
Finance income			(5,417	)		(7,402	)
Share of loss in equity-accounted investees			758			17,141
Impairment charge	9, 12		215,488			326,693
Other income	21		(54,409	)		(35,353	)
Discontinued operation	6		—			(127,243	)
Income tax recovery	22		(142,630	)		(175,268	)
Interest received			3,922			5,935
Income taxes paid			(92,758	)		(233,716	)
Other operating items	24		(71,618	)		(87,862	)

Net cash provided by operations			450,010			480,182

Investing activities
Additions to property, plant and equipment			(358,562	)		(480,108	)
Increase in long-term receivables, investments and other			17,557			11,569
Proceeds from sale of property, plant and equipment			198			701

Net cash used in investing (continuing operations)			(340,807	)		(467,838	)
Net cash provided by investing (discontinued operation)	6		—			447,096

Net cash used in investing			(340,807	)		(20,742	)

Financing activities
Increase in debt			—			496,476
Decrease in debt			(10	)		(351,046	)
Interest paid			(69,507	)		(78,144	)
Proceeds from issuance of shares, stock option plan			—			6,228
Contributions from non-controlling interest			—			794
Dividends paid			(158,313	)		(158,200	)

Net cash used in financing			(227,830	)		(83,892	)

Increase (decrease) in cash and cash equivalents, during the year			(118,627	)		375,548
Exchange rate changes on foreign currency cash balances			10,648			3,126
Cash and cash equivalents, beginning of year			566,583			187,909

Cash and cash equivalents, end of year		$	458,604		$	566,583

Cash and cash equivalents is comprised of:
Cash		$	240,603		$	86,664
Cash equivalents			218,001			479,919

Cash and cash equivalents		$	458,604		$	566,583

See accompanying notes to consolidated financial statements.

2015 Annual Report 95

Notes to consolidated financial statements

For the years ended December 31, 2015 and 2014

1.	Cameco Corporation

Cameco Corporation is incorporated under the Canada Business Corporations Act. The address of its registered office is 2121 11th Street West, Saskatoon, Saskatchewan, S7M 1J3. The consolidated financial statements as at and for the year ended December 31, 2015 comprise Cameco Corporation and its subsidiaries (collectively, the Company or Cameco) and the Company’s interests in associates and joint arrangements. The Company is primarily engaged in the exploration for and the development, mining, refining, conversion, fabrication and trading of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries.

2.	Significant accounting policies

A.	Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

These consolidated financial statements were authorized for issuance by the Company’s board of directors on February 4, 2016.

B.	Basis of presentation

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information is presented in Canadian dollars, unless otherwise noted. Amounts presented in tabular format have been rounded to the nearest thousand except per share amounts and where otherwise noted.

The consolidated financial statements have been prepared on the historical cost basis except for the following material items which are measured on an alternative basis at each reporting date:


Derivative financial instruments				Fair value
Non-derivative financial instruments at fair value through profit and loss				Fair value
Available-for-sale financial assets				Fair value
Liabilities for cash-settled share-based payment arrangements				Fair value
Net defined benefit liability				Fair value of plan assets less the present value of the defined benefit obligation

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may vary from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5.

This summary of significant accounting policies is a description of the accounting methods and practices that have been used in the preparation of these consolidated financial statements and is presented to assist the reader in interpreting the statements contained herein. These accounting policies have been applied consistently to all entities within the consolidated group.

96 CAMECO CORPORATION

C.	Consolidation principles

i.	Business combinations

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Company. The Company measures goodwill at the acquisition date as the fair value of the consideration transferred, including the recognized amount of any non-controlling interests in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in earnings. In a business combination achieved in stages, the acquisition date fair value of the Company’s previously held equity interest in the acquiree is also considered in computing goodwill.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred and equity interests issued by the Company. Consideration also includes the fair value of any contingent consideration and share-based compensation awards that are replaced mandatorily in a business combination.

The Company elects on a transaction-by-transaction basis whether to measure any non-controlling interest at fair value, or at their proportionate share of the recognized amount of the identifiable net assets of the acquiree, at the acquisition date.

Acquisition-related costs are expensed as incurred, except for those costs related to the issue of debt or equity instruments.

ii.

Subsidiaries

The consolidated financial statements include the accounts of Cameco and its subsidiaries. Subsidiaries are entities over which the Company has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and are deconsolidated from the date that control ceases.

iii.

Investments in equity-accounted investees

Cameco’s investments in equity-accounted investees include investments in associates and joint ventures.

Associates are those entities over which the Company has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity, but can also arise where the Company holds less than 20% if it has the power to be actively involved and influential in policy decisions affecting the entity.

Investments in associates are accounted for using the equity method. The equity method involves the recording of the initial investment at cost and the subsequent adjusting of the carrying value of the investment for Cameco’s proportionate share of the earnings or loss and any other changes in the associates’ net assets, such as dividends. The cost of the investment includes transaction costs.

Adjustments are made to align the accounting policies of the associate with those of the Company before applying the equity method. When the Company’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, Cameco resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

iv.

Joint arrangements

A joint arrangement can take the form of a joint operation or joint venture. All joint arrangements involve a contractual arrangement that establishes joint control.

2015 Annual Report 97

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint operation may or may not be structured through a separate vehicle. These arrangements involve joint control of one or more of the assets acquired or contributed for the purpose of the joint operation. The consolidated financial statements of the Company include its share of the assets in such joint operations, together with its share of the liabilities, revenues and expenses arising jointly or otherwise from those operations. All such amounts are measured in accordance with the terms of each arrangement.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture is always structured through a separate vehicle. It operates in the same way as other entities, controlling the assets of the joint venture, earning its own revenue and incurring its own liabilities and expenses. Interests in joint ventures are accounted for using the equity method of accounting, whereby the Company’s proportionate interest in the assets, liabilities, revenues and expenses of jointly controlled entities are recognized on a single line in the consolidated statements of financial position and consolidated statements of earnings. The share of joint ventures results is recognized in the Company’s consolidated financial statements from the date that joint control commences until the date at which it ceases.

v.	Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same manner as unrealized gains, but only to the extent that there is no evidence of impairment.

D.	Foreign currency translation

Items included in the financial statements of each of Cameco’s subsidiaries, associates and joint arrangements are measured using their functional currency, which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Canadian dollars, which is Cameco’s functional and presentation currency.

i.	Foreign currency transactions

Foreign currency transactions are translated into the respective functional currency of the Company and its entities using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. The applicable exchange gains and losses arising on these transactions are reflected in earnings with the exception of foreign exchange gains or losses on provisions for decommissioning and reclamation activities that are in a foreign currency, which are capitalized in property, plant and equipment.

ii.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Canadian dollars at exchange rates at the reporting dates. The revenues and expenses of foreign operations are translated to Canadian dollars at exchange rates at the dates of the transactions.

Foreign currency differences are recognized in other comprehensive income. When a foreign operation is disposed of, in whole, the relevant amount in the foreign currency translation account is transferred to earnings as part of the gain or loss on disposal.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the net investment in a foreign operation, and are recognized in other comprehensive income and presented within equity in the foreign currency translation account.

98 CAMECO CORPORATION

E.	Cash and cash equivalents

Cash and cash equivalents consists of balances with financial institutions and investments in money market instruments, which have a term to maturity of three months or less at the time of purchase.

F.	Short-term investments

Short-term investments are comprised of money market instruments with terms to maturity between three and 12 months.

G.	Inventories

Inventories of broken ore, uranium concentrates, and refined and converted products are measured at the lower of cost and net realizable value.

Cost includes direct materials, direct labour, operational overhead expenses and depreciation. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Consumable supplies and spares are valued at the lower of cost or replacement value.

H.	Property, plant and equipment

i.	Buildings, plant and equipment and other

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment charges. The cost of self-constructed assets includes the cost of materials and direct labour, borrowing costs and any other costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by management, including the initial estimate of the cost of dismantling and removing the items and restoring the site on which they are located.

When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment and depreciated separately.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized in earnings.

ii.

Mineral properties and mine development costs

The decision to develop a mine property within a project area is based on an assessment of the commercial viability of the property, the availability of financing and the existence of markets for the product. Once the decision to proceed to development is made, development and other expenditures relating to the project area are deferred as part of assets under construction and disclosed as a component of property, plant and equipment with the intention that these will be depreciated by charges against earnings from future mining operations. No depreciation is charged against the property until the production stage commences. After a mine property has been brought into the production stage, costs of any additional work on that property are expensed as incurred, except for large development programs, which will be deferred and depreciated over the remaining life of the related assets.

The production stage is reached when a mine property is in the condition necessary for it to be capable of operating in the manner intended by management. The criteria used to assess the start date of the production stage are determined based on the nature of each mine construction project, including the complexity of a mine site. A range of factors is considered when determining whether the production stage has been reached, which includes, but is not limited to, the demonstration of sustainable production at or near the level intended (such as the demonstration of continuous throughput levels at or above a target percentage of the design capacity).

2015 Annual Report 99

iii.

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of the asset less its residual value. Assets which are unrelated to production are depreciated according to the straight-line method based on estimated useful lives as follows:


Land		Not depreciated
Buildings		15 - 25 years
Plant and equipment		3 - 15 years
Furniture and fixtures		3 - 10 years
Other		3 - 5 years

Mining properties and certain mining and conversion assets for which the economic benefits from the asset are consumed in a pattern which is linked to the production level are depreciated according to the unit-of-production method. For conversion assets, the amount of depreciation is measured by the portion of the facilities’ total estimated lifetime production that is produced in that period. For mining assets and properties, the amount of depreciation or depletion is measured by the portion of the mines’ proven and probable mineral reserves recovered during the period.

Depreciation methods, useful lives and residual values are reviewed at each reporting period and are adjusted if appropriate.

iv.

Borrowing costs

Borrowing costs on funds directly attributable to finance the acquisition, production or construction of a qualifying asset are capitalized until such time as substantially all the activities necessary to prepare the qualifying asset for its intended use are complete. A qualifying asset is one that takes a substantial period of time to prepare for its intended use. Capitalization is discontinued when the asset enters the production stage or development ceases. Where the funds used to finance a project form part of general borrowings, interest is capitalized based on the weighted average interest rate applicable to the general borrowings outstanding during the period of construction.

v.	Repairs and maintenance

The cost of replacing a component of property, plant and equipment is capitalized if it is probable that future economic benefits embodied within the component will flow to the Company. The carrying amount of the replaced component is derecognized. Costs of routine maintenance and repair are charged to products and services sold.

I.	Goodwill and intangible assets

Goodwill arising from the acquisition of subsidiaries is initially recognized at cost, measured as the excess of the fair value of the consideration paid over the fair value of the identifiable net assets acquired. At the date of acquisition, goodwill is allocated to the cash generating unit (CGU), or group of CGUs that is expected to receive the economic benefits of the business combination. Goodwill is subsequently measured at cost, less accumulated impairment losses.

Intangible assets acquired individually or as part of a group of assets are initially recognized at cost and measured subsequently at cost less accumulated amortization and impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. The cost of a group of intangible assets acquired in a transaction, including those acquired in a business combination that meet the specified criteria for recognition apart from goodwill, is allocated to the individual assets acquired based on their relative fair values.

Intangible assets that have finite useful lives are amortized over their estimated remaining useful lives. Amortization methods and useful lives are reviewed at each reporting period and are adjusted if appropriate.

J.	Leased assets

Leases which result in the Company receiving substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period of the lease term to produce a constant periodic rate of interest on the remaining balance of the liability.

100 CAMECO CORPORATION

Lease agreements that do not meet the recognition criteria of a finance lease are classified and recognized as operating leases and are not recognized in the Company’s consolidated statements of financial position. Payments made under operating leases are charged to income on a straight-line basis over the lease term.

K.	Finance income and finance costs

Finance income comprises interest income on funds invested, gains on the disposal of available-for-sale financial assets, and changes in the fair value of non-derivative financial instruments. Interest income and interest expense are recognized in earnings as they accrue, using the effective interest method. Finance costs comprise interest and fees on borrowings, unwinding of the discount on provisions, changes in the fair value of non-derivative financial instruments and costs incurred on redemption of debentures.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are expensed in the period incurred.

L.	Research and development costs

Expenditures on research are charged against earnings when incurred. Development costs are recognized as assets when the Company can demonstrate technical feasibility and that the asset will generate probable future economic benefits.

M.	Impairment

i.	Non-derivative financial assets

Financial assets not classified as fair value through profit and loss are assessed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Impairment losses on available-for-sale financial assets are recognized by transferring the cumulative loss that has been recognized in other comprehensive income, and presented in equity, to earnings. The cumulative loss that is removed from other comprehensive income and recognized in earnings is the difference between the acquisition cost, net of any principal payment and amortization, and the current fair value, less any impairment loss previously recognized in earnings.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized in earnings, then the impairment loss is reversed through earnings, otherwise, it is reversed through other comprehensive income. Impairment losses on available-for-sale equity securities that are recognized in earnings are never reversed through earnings.

ii.

Non-financial assets

The carrying amounts of Cameco’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into CGUs which are the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

2015 Annual Report 101

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Fair value is determined as the amount that would be obtained from the sale of the asset or CGU in an arm’s-length transaction between knowledgeable and willing parties. For exploration properties, fair value is based on the implied fair value of the resources in place using comparable market transaction metrics.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognized in earnings. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

Impairment losses recognized in prior periods are assessed at each reporting date whenever events or changes in circumstances indicate that the impairment may have reversed. If the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in earnings. An impairment loss in respect of goodwill is not reversed.

N.	Exploration and evaluation expenditures

Exploration and evaluation expenditures are those expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. These expenditures include researching and analyzing existing exploration data, conducting geological studies, exploratory drilling and sampling, and compiling prefeasibility and feasibility studies. Exploration and evaluation expenditures are charged against earnings as incurred, except when there is a high degree of confidence in the viability of the project and it is probable that these costs will be recovered through future development and exploitation.

The technical feasibility and commercial viability of extracting a resource is considered to be determinable based on several factors, including the existence of proven and probable reserves and the demonstration that future economic benefits are probable. When an area is determined to be technically feasible and commercially viable, the exploration and evaluation assets attributable to that area are first tested for impairment and then transferred to property, plant and equipment.

Exploration and evaluation costs that have been acquired in a business combination or asset acquisition are capitalized under the scope of IFRS 6, Exploration for and Evaluation of Mineral Resources, and are reported as part of property, plant and equipment.

O.	Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the risk-adjusted expected future cash flows at a pre-tax risk-free rate that reflects current market assessments of the time value of money. The unwinding of the discount is recognized as a finance cost.

102 CAMECO CORPORATION

i.	Environmental restoration

The mining, extraction and processing activities of the Company normally give rise to obligations for site closure and environmental restoration. Closure and restoration can include facility decommissioning and dismantling, removal or treatment of waste materials, as well as site and land restoration. The Company provides for the closure, reclamation and decommissioning of its operating sites in the financial period when the related environmental disturbance occurs, based on the estimated future costs using information available at the reporting date. Costs included in the provision comprise all closure and restoration activity expected to occur gradually over the life of the operation and at the time of closure. Routine operating costs that may impact the ultimate closure and restoration activities, such as waste material handling conducted as a normal part of a mining or production process, are not included in the provision.

The timing of the actual closure and restoration expenditure is dependent upon a number of factors such as the life and nature of the asset, the operating licence conditions and the environment in which the mine operates. Closure and restoration provisions are measured at the expected value of future cash flows, discounted to their present value using a current pre-tax risk-free rate. Significant judgments and estimates are involved in deriving the expectations of future activities and the amount and timing of the associated cash flows.

At the time a provision is initially recognized, to the extent that it is probable that future economic benefits associated with the reclamation, decommissioning and restoration expenditure will flow to the Company, the corresponding cost is capitalized as an asset. The capitalized cost of closure and restoration activities is recognized in property, plant and equipment and depreciated on a unit-of-production basis. The value of the provision is gradually increased over time as the effect of discounting unwinds. The unwinding of the discount is an expense recognized in finance costs.

Closure and rehabilitation provisions are also adjusted for changes in estimates. The provision is reviewed at each reporting date for changes to obligations, legislation or discount rates that effect change in cost estimates or life of operations. The cost of the related asset is adjusted for changes in the provision resulting from changes in estimated cash flows or discount rates, and the adjusted cost of the asset is depreciated prospectively.

ii.

Waste disposal

The refining, conversion and manufacturing processes generate certain uranium-contaminated waste. The Company has established strict procedures to ensure this waste is disposed of safely. A provision for waste disposal costs in respect of these materials is recognized when they are generated. Costs associated with the disposal, the timing of cash flows and discount rates are estimated both at initial recognition and subsequent measurement.

P.	Employee future benefits

i.	Pension obligations

The Company accrues its obligations under employee benefit plans. The Company has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan other than a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

2015 Annual Report 103

The liability recognized in the consolidated statements of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually, by qualified independent actuaries using the projected unit credit method prorated on service and management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

The Company recognizes all actuarial gains and losses arising from defined benefit plans in other comprehensive income, and reports them in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in earnings.

For defined contribution plans, the contributions are recognized as employee benefit expense in earnings in the periods during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

ii.

Other post-retirement benefit plans

The Company provides certain post-retirement health care benefits to its retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses are recognized in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

iii.

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be measured reliably.

iv.

Termination benefits

Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts an entity’s offer of benefits in exchange for termination of employment. Cameco recognizes termination benefits as an expense at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.

v.	Share-based compensation

For equity-settled plans, the grant date fair value of share-based compensation awards granted to employees is recognized as an employee benefit expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For cash-settled plans, the fair value of the amount payable to employees is recognized as an expense, with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is re-measured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as employee benefit expense in earnings.

104 CAMECO CORPORATION

Cameco’s contributions under the employee share ownership plan are expensed during the year of contribution. Shares purchased with Company contributions and with dividends paid on such shares become unrestricted on January 1 of the second plan year following the date on which such shares were purchased.

Q.	Revenue recognition

Cameco supplies uranium concentrates and uranium conversion services to utility customers.

Cameco recognizes revenue on the sale of its nuclear products when the risks and rewards of ownership pass to the customer and collection is reasonably assured. Cameco’s sales are pursuant to an enforceable contract that indicates the type of sales arrangement, pricing and delivery terms, as well as details related to the transfer of title.

Cameco has three types of sales arrangements with its customers in its uranium and fuel services businesses. These arrangements include uranium supply, toll conversion services and conversion supply (converted uranium), which is a combination of uranium supply and toll conversion services.

Uranium supply

In a uranium supply arrangement, Cameco is contractually obligated to provide uranium concentrates to its customers. Cameco-owned uranium is physically delivered to conversion facilities (Converters) where the Converter will credit Cameco’s account for the volume of accepted uranium. Based on delivery terms in a sales contract with its customer, Cameco instructs the Converter to transfer title of a contractually specified quantity of uranium to the customer’s account at the Converter’s facility. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the customer and recognizes revenue for the uranium supply.

Toll conversion services

In a toll conversion arrangement, Cameco is contractually obligated to convert customer-owned uranium to a chemical state suitable for enrichment. Based on delivery terms in a sales contract with its customer, Cameco either (i) physically delivers converted uranium to enrichment facilities (Enrichers) where it instructs the Enricher to transfer title of a contractually specified quantity of converted uranium to the customer’s account at the Enricher’s facility, or (ii) transfers title of a contractually specified quantity of converted uranium to either an Enricher’s account or the customer’s account. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the customer and recognizes revenue for the toll conversion services.

Conversion supply

In a conversion supply arrangement, Cameco is contractually obligated to provide converted uranium of acceptable origins to its customers. Based on delivery terms in a sales contract with its customer, Cameco either (i) physically delivers converted uranium to the Enricher where it instructs the Enricher to transfer title of a contractually specified quantity of converted uranium to the customer’s account at the Enricher’s facility, or (ii) transfers title of a contractually specified quantity of converted uranium to either an Enricher’s account or a customer’s account at Cameco’s Port Hope conversion facility. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the customer and recognizes revenue for both the uranium supplied and the conversion service provided.

R.	Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another.

2015 Annual Report 105

i.	Non-derivative financial assets and financial liabilities

At initial recognition, Cameco classifies each of its financial assets and financial liabilities into one of the following categories:

Fair value through profit or loss

A financial asset or liability is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Cameco classifies a financial instrument as held-for-trading if it was acquired principally for the purpose of selling or repurchasing in the near term, or if it is part of a portfolio with evidence of a recent pattern of short-term profit taking. Directly attributable transaction costs are recognized in earnings as incurred. These financial assets and financial liabilities are measured at fair value, with any gains or losses on revaluation being recognized in earnings.

Held-to-maturity

Held-to-maturity investments are financial assets that an entity has the intention and ability to hold until maturity, provide fixed or determinable payments and contain a fixed maturity date. Assets in this category are initially measured at fair value and subsequently measured at amortized cost using the effective interest method.

Loans and receivables

Loans and receivables are financial assets that provide fixed or determinable payments and are not quoted in an active market. Assets in this category are initially measured at fair value and subsequently measured at amortized cost using the effective interest method.

Available-for-sale assets

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified into any of the other categories. These assets are measured at fair value plus any directly attributable transaction costs with any gains or losses on re-measurement recognized in other comprehensive income. Accumulated changes in fair value are recorded as a separate component of equity until the asset is derecognized or impaired, then the cumulative gain or loss in other comprehensive income is transferred to earnings.

Other financial liabilities

This category consists of all non-derivative financial liabilities that do not meet the definition of held-for-trading liabilities, and that have not been designated as liabilities at fair value through profit or loss. These liabilities are initially recognized at fair value less any directly attributable transaction costs and are subsequently measured at amortized cost using the effective interest method. Transaction costs arising on the issue of equity instruments are recognized directly in equity. Transaction costs that are directly related to the probable issuance of a security that is classified as a financial liability is deducted from the amount of the financial liability when it is initially recognized, or recognized in earnings when the issuance is no longer probable.

Cameco derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred.

A financial liability is derecognized when its contractual obligations are discharged or cancelled, or expire.

ii.

Derivative financial instruments

The Company holds derivative financial instruments to reduce exposure to fluctuations in foreign currency exchange rates and interest rates. Except for those designated as hedging instruments, all derivative financial instruments are recorded at fair value in the consolidated statements of financial position, with any directly attributable transaction costs recognized in earnings as incurred. Subsequent to initial recognition, changes in fair value are recognized in earnings.

The purpose of hedging transactions is to modify the Company’s exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging item. When hedge accounting is appropriate, the hedging relationship is designated as a fair value hedge, a cash flow hedge, or a foreign currency risk hedge related to a net investment in a foreign operation. The Company does not have any instruments that have been designated as hedge transactions at December 31, 2015.

106 CAMECO CORPORATION

Separable embedded derivatives

Derivatives may be embedded in other financial instruments or executory contracts (the “host instrument”). Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not clearly and closely related to those of the host instrument, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not designated at fair value. These embedded derivatives are measured at fair value with subsequent changes recognized in earnings through gains or losses on derivatives.

S.	Income tax

Income tax expense is comprised of current and deferred taxes. Current tax and deferred tax are recognized in earnings except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Current tax assets and liabilities are measured at the amount expected to be paid or recovered from the taxation authorities.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Company’s exposure to uncertain tax positions is evaluated and a provision is made where it is probable that this exposure will materialize.

T.	Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a reduction of equity, net of any tax effects.

U.	Earnings per share

The Company presents basic and diluted earnings per share data for its common shares. Earnings per share is calculated by dividing the net earnings attributable to equity holders of the Company by the weighted average number of common shares outstanding.

Diluted earnings per share is determined by adjusting the net earnings attributable to equity holders of the Company and the weighted average number of common shares outstanding, for the effects of all dilutive potential common shares. The calculation of diluted earnings per share assumes that outstanding options which are dilutive to earnings per share are exercised and the proceeds are used to repurchase shares of the Company at the average market price of the shares for the period. The effect is to increase the number of shares used to calculate diluted earnings per share.

2015 Annual Report 107

V.	Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other segments. To be classified as a segment, discrete financial information must be available and operating results must be regularly reviewed by the Company’s Chief Executive Officer.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

W.	Discontinued operations

A discontinued operation is a component of the Company that has either been disposed of or that is classified as held for sale. A component of the Company is comprised of operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. Net earnings of a discontinued operation and any gain or loss on disposal are combined and presented as net earnings from discontinued operations in the consolidated statements of earnings.

3.	Accounting standards

A.	New standards and interpretations not yet adopted

i.	Revenue

In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers (IFRS 15). IFRS 15 is effective for periods beginning on or after January 1, 2018 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. The extent of the impact of adoption of IFRS 15 has not yet been determined.

ii.

Financial instruments

In July 2014, the IASB issued IFRS 9, Financial Instruments (IFRS 9). IFRS 9 replaces the existing guidance in IAS 39, Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 includes revised guidance on the classification and measurement of financial assets, a new expected credit loss model for calculating impairment on financial assets and new hedge accounting requirements. It also carries forward, from IAS 39, guidance on recognition and derecognition of financial instruments.

iii.

Leases

In January 2016, the IASB issued IFRS 16, Leases (IFRS 16). IFRS 16 is effective for periods beginning on or after January 1, 2019, with early adoption permitted. IFRS 16 eliminates the current dual model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. The extent of the impact of adoption of IFRS 16 has not yet been determined.

4.	Determination of fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair value, for both financial and non-financial assets and liabilities.

108 CAMECO CORPORATION

The fair value of an asset or liability is generally estimated as the amount that would be received on sale of an asset, or paid to transfer a liability in an orderly transaction between market participants at the reporting date. Fair values of assets and liabilities traded in an active market are determined by reference to last quoted prices, in the principal market for the asset or liability. In the absence of an active market for an asset or liability, fair values are determined based on market quotes for assets or liabilities with similar characteristics and risk profiles, or through other valuation techniques. Fair values determined using valuation techniques require the use of inputs, which are obtained from external, readily observable market data when available. In some circumstances, inputs that are not based on observable data must be used. In these cases, the estimated fair values may be adjusted in order to account for valuation uncertainty, or to reflect the assumptions that market participants would use in pricing the asset or liability.

All fair value measurements are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:

Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the reporting date for identical assets or liabilities.

Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety.

Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period during which the transfer occurred. There were no transfers between level 1, level 2, or level 3 during the period. Cameco does not have any recurring fair value measurements that are categorized as level 3 as of the reporting date.

Further information about the techniques and assumptions used to measure fair values is included in the following notes:

Note 9 - Property, plant and equipment

Note 10 - Goodwill and intangible assets

Note 12 - Equity-accounted investees

Note 25 - Share-based compensation plans

Note 27 - Financial instruments and risk management

5.	Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

Information about critical judgments in applying the accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is discussed below. Further details of the nature of these judgments, estimates and assumptions may be found in the relevant notes to the consolidated financial statements.

2015 Annual Report 109

A.	Recoverability of long-lived and intangible assets

Cameco assesses the carrying values of property, plant and equipment, and intangible assets when there is an indication of possible impairment. Goodwill and intangible assets not yet available for use or with indefinite useful lives are tested for impairment annually. If it is determined that carrying values of assets or goodwill cannot be recovered, the unrecoverable amounts are charged against current earnings. Recoverability is dependent upon assumptions and judgments regarding market conditions, costs of production, sustaining capital requirements and mineral reserves. Other assumptions used in the calculation of recoverable amounts are discount rates, future cash flows and profit margins. A material change in assumptions may significantly impact the potential impairment of these assets.

B.	Cash generating units

C.	Provisions for decommissioning and reclamation of assets

Significant decommissioning and reclamation activities are often not undertaken until near the end of the useful lives of the productive assets. Regulatory requirements and alternatives with respect to these activities are subject to change over time. A significant change to either the estimated costs or mineral reserves may result in a material change in the amount charged to earnings.

D.	Income taxes

Cameco operates in a number of tax jurisdictions and is, therefore, required to estimate its income taxes in each of these tax jurisdictions in preparing its consolidated financial statements. In calculating income taxes, consideration is given to factors such as tax rates in the different jurisdictions, non-deductible expenses, changes in tax law and management’s expectations of future operating results. Cameco estimates deferred income taxes based on temporary differences between the income and losses reported in its consolidated financial statements and its taxable income and losses as determined under the applicable tax laws. The tax effect of these temporary differences is recorded as deferred tax assets or liabilities in the consolidated financial statements. The calculation of income taxes requires the use of judgment and estimates. If these judgments and estimates prove to be inaccurate, future earnings may be materially impacted.

E.	Commencement of production stage

Until a mining property is declared as being in the production stage, all costs related to its development are capitalized. The determination of the date on which a mine enters the production stage is a matter of judgment that impacts when capitalization of development costs ceases and depreciation of the mining property commences and is charged to earnings. Refer to note 2 (h)(ii) for further information on the criteria used to make this assessment.

F.	Mineral reserves

Depreciation on property, plant and equipment is primarily calculated using the unit-of-production method. This method allocates the cost of an asset to each period based on current period production as a portion of total lifetime production or a portion of estimated mineral reserves. Estimates of life-of-mine and amounts of mineral reserves are updated annually and are subject to judgment and significant change over time. If actual mineral reserves prove to be significantly different than the estimates, there could be a material impact on the amounts of depreciation charged to earnings.

110 CAMECO CORPORATION

G.	Purchase price allocations

The purchase price related to a business combination or asset acquisition is allocated to the underlying acquired assets and liabilities based on their estimated fair values at the time of acquisition. The determination of fair value requires Cameco to make assumptions, estimates and judgments regarding future events. The allocation process is inherently subjective and impacts the amounts assigned to individually identifiable assets and liabilities. As a result, the purchase price allocation impacts Cameco’s reported assets and liabilities and future net earnings due to the impact on future depreciation and amortization expense and impairment tests.

H.	Determination of joint control

Cameco conducts certain operations through joint ownership interests. Judgment is required in assessing whether Cameco has joint control over the investee, which involves determining the relevant activities of the arrangement and whether decisions around relevant activities require unanimous consent. Judgment is also required to determine whether a joint arrangement should be classified as a joint venture or joint operation. Classifying the arrangement requires us to assess our rights and obligations arising from the arrangement. Specifically, management considers the structure of the joint arrangement and whether it is structured through a separate vehicle and when the arrangement is structured through a separate vehicle, we also consider the rights and obligations arising from the legal form of the separate vehicle, the terms of the contractual arrangements and other facts and circumstances, when relevant. This judgment influences whether we equity account or proportionately consolidate our interest in the arrangement.

6.	Discontinued operation

On March 27, 2014, Cameco completed the sale of its 31.6% limited partnership interest in Bruce Power L.P. (BPLP) which operates the four Bruce B nuclear reactors in Ontario. The aggregate sale price for Cameco’s interest in BPLP and certain related entities was $450,000,000. The sale has been accounted for effective January 1, 2014. Cameco received net proceeds of approximately $447,096,000 and realized an after tax gain of $127,243,000 on this divestiture.

As a result of the transaction, Cameco presented the results of BPLP as a discontinued operation and revised its statement of earnings, statement of comprehensive income and statement of cash flows to reflect this change in presentation. Net earnings from this discontinued operation are as follows:


	2015		2014
Share of earnings from BPLP and related entities	$	—	$	—
Tax expense		—		—

		—		—
Gain on disposal of BPLP and related entities		—		144,912
Tax expense on disposal		—		17,669

		—		127,243

Net earnings from discontinued operation	$	—	$	127,243

2015 Annual Report 111

7.	Accounts receivable


	2015		2014
Trade receivables	$	236,859	$	428,850
HST/VAT receivables		6,239		19,523
Other receivables		3,767		6,629

Total	$	246,865	$	455,002

The Company’s exposure to credit and currency risks as well as impairment loss related to trade and other receivables, excluding harmonized sales tax (HST)/value added tax (VAT) receivables is disclosed in note 27.

8.	Inventories


	2015		2014
Uranium
Concentrate	$	887,083	$	500,342
Broken ore		41,722		21,289

		928,805		521,631

NUKEM		216,361		251,942

Fuel services		140,100		128,705

Total	$	1,285,266	$	902,278

In the second quarter of 2015, the production stage was reached at Cameco’s Cigar Lake operation. Effective May 1, 2015, we commenced charging all production costs, including depreciation, to inventory and subsequently recognizing in cost of sales as the product is sold.

Cameco expensed $1,935,000,000 of inventory as cost of sales during 2015 (2014 - $1,698,000,000). Included in cost of sales is a $3,400,000 net recovery, resulting from the reversal of previous NUKEM inventory write-downs to reflect net realizable value (2014 - $4,300,000).

NUKEM enters into financing arrangements where future receivables arising from certain sales contracts are sold to financial institutions in exchange for cash. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts, which are recognized as deferred sales (note 16). In addition, NUKEM is required to pledge the underlying inventory as security against these performance obligations. As of December 31, 2015, NUKEM had $97,945,000 ($70,770,000 (US)) of inventory pledged as security under financing arrangements ((2014 - $94,378,000 ($81,353,000 (US)).

112 CAMECO CORPORATION

9.	Property, plant and equipment

At December 31, 2015


	Land and buildings			Plant and equipment			Furniture and fixtures			Under construction			Exploration and evaluation			Total
Cost
Beginning of year	$	3,423,736		$	1,984,721		$	120,072		$	1,962,500		$	1,084,715		$	8,575,744
Additions		35,579			23,919			1,329			292,443			2,450			355,720
Transfers		1,245,941			508,007			5,950			(1,747,248	)		(12,650	)		—
Change in reclamation provision		26,348			—			—			—			—			26,348
Disposals		(7,491	)		(38,077	)		(9,198	)		(2,476	)		(229	)		(57,471	)
Effect of movements in exchange rates		138,047			49,918			3,146			7,082			72,814			271,007

End of year		4,862,160			2,528,488			121,299			512,301			1,147,100			9,171,348

Accumulated depreciation and impairment
Beginning of year		1,769,526			1,164,969			104,101			91,621			154,506			3,284,723
Depreciation charge		232,179			133,655			12,925			—			192			378,951
Transfers		21,368			94			—			(21,462	)		—			—
Disposals		(2,296	)		(37,530	)		(9,168	)		—			—			(48,994	)
Impairment charge^(a)		120,343			70,827			108			18,522			—			209,800
Effect of movements in exchange rates		85,082			21,293			2,478			—			9,855			118,708

End of year		2,226,202			1,353,308			110,444			88,681			164,553			3,943,188

Net book value at December 31, 2015	$	2,635,958		$	1,175,180		$	10,855		$	423,620		$	982,547		$	5,228,160

At December 31, 2014


	Land and buildings			Plant and equipment			Furniture and fixtures			Under construction			Exploration and evaluation			Total
Cost
Beginning of year	$	2,971,894		$	1,819,611		$	97,220		$	1,904,400		$	1,072,242		$	7,865,367
Additions		26,688			18,288			5,716			407,492			14,640			472,824
Transfers		143,639			152,564			17,171			(313,374	)		—			—
Change in reclamation provision		228,223			—			—			—			—			228,223
Disposals^(c)		(902	)		(24,463	)		(1,111	)		(40,664	)		(10,984	)		(78,124	)
Effect of movements in exchange rates		54,194			18,721			1,076			4,646			8,817			87,454

End of year		3,423,736			1,984,721			120,072			1,962,500			1,084,715			8,575,744

Accumulated depreciation and impairment
Beginning of year		1,491,681			1,019,529			81,216			70,159			161,789			2,824,374
Depreciation charge		185,238			111,980			23,574			94			161			321,047
Transfers		(4,190	)		4,190			—			—			—			—
Disposals		(678	)		(16,736	)		(336	)		—			(7,160	)		(24,910	)
Impairment charge^(b)		66,084			38,968			—			21,368			—			126,420
Effect of movements in exchange rates		31,391			7,038			(353	)		—			(284	)		37,792

End of year		1,769,526			1,164,969			104,101			91,621			154,506			3,284,723

Net book value at December 31, 2014	$	1,654,210		$	819,752		$	15,971		$	1,870,879		$	930,209		$	5,291,021

2015 Annual Report 113

Cameco has contractual capital commitments of approximately $55,000,000 at December 31, 2015. Certain of the contractual commitments may contain cancellation clauses, however the Company discloses the commitments based on management’s intent to fulfill the contract. The majority of this amount is expected to be incurred in 2016.

(a) During 2015, Cameco recognized a $209,800,000 impairment charge relating to its Rabbit Lake mill in northern Saskatchewan, which is part of its uranium segment. Due to increased uncertainty around future production sources for the Rabbit Lake mill as a result of ongoing economic conditions, the Company concluded it was appropriate to recognize an impairment charge. The amount of the charge was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mill was determined to be $68,971,000 based on a fair value less costs to sell model, which incorporated the future cash flows expected to be derived from the mill. It is categorized as a non-recurring level 3 fair value measurement.

The discount rate used in the fair value less costs to sell calculation was 8% and was determined based on a market participant’s incremental borrowing cost, adjusted for the marginal return that the participant would expect to use on an investment in the mill. The recoverable amount is not sensitive to changes in the discount rate. Other key assumptions include operating and capital cost forecasts and the margin applied. Operating and capital cost forecasts have been determined based on management’s internal cost estimates. A 10% increase in these cost assumptions decreases the recoverable amount by $7,900,000.

(b) During 2014, Cameco recognized a $126,420,000 impairment charge relating to its Rabbit Lake mine in northern Saskatchewan, which is part of its uranium segment. Due to the deferral of various projects that were related to planned production over the remaining life of the Eagle Point mine, the Company concluded it was appropriate to recognize an impairment charge. The amount of the charge was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mine was determined to be $28,570,000 based on a fair value less costs to sell model, which incorporated the future cash flows expected to be derived from the mine. It is categorized as a non-recurring level 3 fair value measurement.

The discount rate used in the fair value less costs to sell calculation was 8% and was determined based on a market participant’s incremental borrowing cost, adjusted for the marginal return that the participant would expect to use on an investment in the mine. The recoverable amount is not sensitive to changes in the discount rate. Other key assumptions include uranium price forecasts and operating and capital cost forecasts. Uranium prices applied in the calculation were based on approved internal price forecasts, which reflect management’s expectation of prices that a market participant would use. Operating and capital cost forecasts have been determined based on management’s internal cost estimates. A $1/lb decrease in the uranium price assumption decreases the recoverable amount by $17,600,000.

(c) Due to extended low market conditions and continued efforts to reduce costs, certain projects were re-evaluated. As a result, the Company wrote off $40,664,000 of assets under construction on these projects in 2014.

114 CAMECO CORPORATION

10.

Goodwill and intangible assets

A.	Reconciliation of carrying amount

At December 31, 2015


	Goodwill		Contracts		Intellectual property		Patents		Total
Cost
Beginning of year	$	102,526	$	101,549	$	118,819	$	10,141	$	333,035
Effect of movements in exchange rates		19,788		19,599		—		1,957		41,344

End of year		122,314		121,148		118,819		12,098		374,379

Accumulated amortization
Beginning of year		—		88,978		40,992		1,963		131,933
Amortization charge		—		2,458		4,438		609		7,505
Effect of movements in exchange rates		—		17,373		—		438		17,811

End of year		—		108,809		45,430		3,010		157,249

Net book value at December 31, 2015	$	122,314	$	12,339	$	73,389	$	9,088	$	217,130

At December 31, 2014


	Goodwill		Contracts			Intellectual property		Patents		Total
Cost
Beginning of year	$	93,998	$	93,102		$	118,819	$	9,298	$	315,217
Effect of movements in exchange rates		8,528		8,447			—		843		17,818

End of year		102,526		101,549			118,819		10,141		333,035

Accumulated amortization
Beginning of year		—		82,960			36,940		1,286		121,186
Amortization charge		—		(1,438	)		4,052		531		3,145
Effect of movements in exchange rates		—		7,456			—		146		7,602

End of year		—		88,978			40,992		1,963		131,933

Net book value at December 31, 2014	$	102,526	$	12,571		$	77,827	$	8,178	$	201,102

B.	Amortization

The intangible asset values relate to intellectual property acquired with Cameco Fuel Manufacturing Inc. (CFM), patents acquired with UFP Investments LLC (UFP) and purchase and sales contracts acquired with NUKEM. The CFM intellectual property is being amortized on a unit-of-production basis over its remaining life. Amortization is allocated to the cost of inventory and is recognized in cost of products and services sold as inventory is sold. The patents acquired with UFP are being amortized to cost of products and services sold on a straight-line basis over their remaining life which expires in July 2029. The NUKEM purchase and sales contracts will be amortized to earnings over the remaining terms of the underlying contracts, which extend to 2022. Amortization of the purchase contracts is allocated to the cost of inventory and is included in cost of products and services sold as inventory is sold. Sales contracts are amortized to revenue. Approximately $3,517,000 of pre-tax earnings (in USD) relating to the amortization of the fair value allocated to the NUKEM contracts will be amortized in 2016 with the remaining balance being recognized fairly evenly each year through 2022.

2015 Annual Report 115

C.	Impairment test

For the purpose of impairment testing, goodwill is attributable to NUKEM, which is considered a CGU.

The recoverable amount of NUKEM was estimated based on a value in use calculation, which involved discounting the future cash flows expected to be generated from the continuing use of the CGU. The estimated recoverable amount of NUKEM exceeded its carrying amount by approximately $55,524,000 (US) and therefore no impairment loss was recognized.

Five years of cash flows were included in the discounted cash flow model. Any cash flows expected to be generated beyond the initial five-year period were extrapolated using a terminal value growth rate. The projected cash flows included in the calculation were based upon NUKEM’s approved financial forecasts and strategic plan, which incorporate NUKEM’s current contract portfolio as well as management’s expectations regarding future business activity. The key assumptions used in the estimation of the value in use were as follows:


	2015
Discount rate (pre-tax)		11.8	%
Discount rate (post-tax)		8.8	%
Terminal value growth rate		2.5	%

The discount rate was determined based on NUKEM’s internal weighted average cost of capital, adjusted for the marginal return a market participant would expect to earn on an investment in the entity. It represents a nominal, post-tax figure. The terminal value growth rate was determined based on management’s expected average annual long-term growth in the uranium industry. The rate represents a nominal figure and is consistent with forecast economic growth rates observed in the market.

Other key assumptions include uranium price forecasts and perpetual cash flows. Uranium prices applied in the calculation were based on approved internal price forecasts, which reflect management’s experience and industry expertise. These prices are consistent with expected long-term prices observed in the market. Perpetual cash flows have been determined based on management’s expectation of future business activity.

Cameco has validated the results of the value in use calculation by performing sensitivity tests on its key assumptions. Holding all other variables constant, the decreases in recoverable amount created by marginal changes in each of the key assumptions are as follows:


	Change in assumption	Amount of decrease
Discount rate	1% increase	$	37,222
Terminal value growth rate	1% decrease		30,805
Uranium prices	$1/lb decrease		6,001
Perpetual annual cash flow	$1 million (US) decrease		11,131

As a result of these tests, the Company believes that any reasonably possible changes in the key assumptions would not result in NUKEM’s carrying amount exceeding its recoverable amount.

116 CAMECO CORPORATION

11.

Long-term receivables, investments and other


	2015			2014
Investments in equity securities [note 27]	$	938		$	6,601
Derivatives [note 27]		11,143			3,889
Advances receivable from JV Inkai LLP [note 32]		87,188			91,672
Investment tax credits		93,972			90,658
Amounts receivable related to tax dispute [note 22]		232,614			211,604
Other		35,574			29,197

		461,429			433,621
Less current portion		(12,193	)		(10,341	)

Net	$	449,236		$	423,280

12.

Equity-accounted investees

Associates

i.	GE-Hitachi Global Laser Enrichment LLC (GLE)

GLE primarily operates in North Carolina and is testing a third-generation technology that, if successful, will use lasers to commercially enrich uranium. Cameco owns a 24% interest in GLE and accounts for it under the equity method of accounting.

During 2014, a decision was made by the majority partner of GLE to significantly reduce funding of the project. Because the technology is unique to the industry and inherently risky, the significant reduction of funding introduced a further level of risk and jeopardized the viability of the project. As a result, Cameco determined the fair value less costs to sell to be nil and as such recognized an impairment charge of $183,615,000, which represented the full amount of Cameco’s investment. Future contributions to the project are being reflected in net earnings.

The following table summarizes the share of GLE’s earnings that Cameco has recognized:


	2015		2014
Loss from operations and comprehensive loss	$	—	$	(55,279	)
Cameco’s share of loss from operations and comprehensive loss (24%)	$	—	$	(13,267	)

Following the impairment of the investment in 2014, Cameco discontinued recognizing its share of losses in GLE. Cameco’s contributions to GLE are recorded in earnings as research and development.

ii.

Other associate

Cameco has one other associate. The following table summarizes the carrying amount and share of loss and other comprehensive income of this associate:


	2015			2014
Carrying amount of associate	$	2,472		$	3,230
Share of loss from operations and comprehensive loss	$	(758	)	$	(3,874	)

At December 31, 2015, the quoted value of the Company’s share in this associate that has shares listed on a recognized stock exchange was $7,503,000 (2014 - $14,256,000).

2015 Annual Report 117

13.

Accounts payable and accrued liabilities


	2015		2014
Trade payables	$	199,084	$	183,120
Non-trade payables		107,731		114,174
Payables due to related parties		11,041		18,964

Total	$	317,856	$	316,258

The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 27.

14.

Short-term debt

Cameco borrows directly in the commercial paper market. At December 31, 2015 and 2014, there was no commercial paper outstanding.

NUKEM has a multicurrency revolving loan facility that is available until October 1, 2020. Total funds of €75,000,000 are available under the facility, with the option to increase the facility by an additional €25,000,000. Amounts can be drawn in either Euros or US dollars in the form of bank overdrafts, letters of credit, short-term loans or foreign exchange facilities. Any amounts drawn in Euros bear interest at a rate equal to the comparable EURIBOR on the draw date plus 0.6%, while amounts drawn in US dollars bear interest at a rate equal to the comparable LIBOR on the draw date plus 0.6%.

At December 31, 2015 and 2014, there were no amounts withdrawn against the facility. As of December 31, 2015, NUKEM has $406,000 (US) in letters of credit outstanding against the facility in support of performance obligations under outstanding delivery contracts (2014 - $356,000 (US)).

The terms of the facility contain a financial covenant that requires NUKEM to maintain a minimum working capital to debt ratio of 1.35. The facility also stipulates Cameco as a guarantor for NUKEM’s withdrawals and requires the Company to maintain a credit rating of at least BBB-. Failure to comply with these covenants could result in cancellation of the facility and accelerated payment of any outstanding amounts. As of December 31, 2015, NUKEM and Cameco were in compliance with the covenants and the Company does not expect its operating and investing activities in 2016 to be constrained by them.

15.

Long-term debt


	2015		2014
Unsecured debentures
Series D - 5.67% debentures due September 2, 2019	$	497,954	$	497,465
Series E - 3.75% debentures due November 14, 2022		398,097		397,857
Series F - 5.09% debentures due November 14, 2042		99,243		99,230
Series G - 4.19% debentures due June 24, 2024		496,943		496,646

Total	$	1,492,237	$	1,491,198

On June 24, 2014, Cameco issued $500,000,000 of Series G debentures and announced the early redemption of the outstanding Series C debentures. The Series G debentures bear interest at a rate of 4.19% per annum. The net proceeds of the issue after deducting expenses were approximately $496,400,000. The debentures mature on June 24, 2024 and are being amortized at an effective interest rate of 4.28%. The $300,000,000 principal amount of the Series C debentures was redeemed on July 16, 2014. The company incurred total charges of $12,135,000 in relation to the early redemption of these debentures (note 20).

118 CAMECO CORPORATION

Cameco has a $1,250,000,000 unsecured revolving credit facility that is available until November 1, 2019. Upon mutual agreement, the facility can be extended for an additional year on the anniversary date. In addition to direct borrowings under the facility, up to $100,000,000 can be used for the issuance of letters of credit and, to the extent necessary, it may be used to provide liquidity support for the Company’s commercial paper program. The agreement also provides the ability to increase the revolving credit facility above $1,250,000,000 by increments no less than $50,000,000, to a total of $1,750,000,000. The facility ranks equally with all of Cameco’s other senior debt. As of December 31, 2015 and 2014, there were no amounts outstanding under this facility.

Cameco has $1,490,809,000 (2014 - $1,068,420,000) in letter of credit facilities. Outstanding and committed letters of credit at December 31, 2015 amounted to $1,384,061,000 (2014 - $950,716,000), the majority of which relate to future decommissioning and reclamation liabilities (note 17).

Cameco is bound by a covenant in its revolving credit facility. The covenant requires a funded debt to tangible net worth ratio equal to or less than 1:1. Non-compliance with this covenant could result in accelerated payment and termination of the revolving credit facility. At December 31, 2015, Cameco was in compliance with the covenant and does not expect its operating and investing activities in 2016 to be constrained by it.

The table below represents currently scheduled maturities of long-term debt:


2016	2017		2018		2019		2020		Thereafter		Total
$—		—		—		497,954		—		994,283	$	1,492,237

16.

Other liabilities


	2015			2014
Deferred sales	$	132,904		$	123,298
Derivatives [note 27]		168,236			67,916
Accrued pension and post-retirement benefit liability [note 26]		64,135			61,670
Other		7,980			7,033

		373,255			259,917
Less current portion		(241,113	)		(87,883	)

Net	$	132,142		$	172,034

Deferred sales includes $110,749,000 ($80,021,000 (US)) of performance obligations relating to financing arrangements entered into by NUKEM (2014 - $107,076,000 ($92,299,000 (US))) (note 8).

2015 Annual Report 119

17.

Provisions


	Reclamation			Waste disposal			Total
Beginning of year	$	828,015		$	18,295		$	846,310
Changes in estimates and discount rates		26,348			58			26,406
Provisions used during the period		(10,848	)		(959	)		(11,807	)
Unwinding of discount		21,098			330			21,428
Effect of movements in exchange rates		52,421			—			52,421

End of period	$	917,034		$	17,724		$	934,758

Current	$	12,994		$	3,601		$	16,595
Non-current		904,040			14,123			918,163

	$	917,034		$	17,724		$	934,758

A.	Reclamation provision

Cameco’s estimates of future decommissioning obligations are based on reclamation standards that satisfy regulatory requirements. Elements of uncertainty in estimating these amounts include potential changes in regulatory requirements, decommissioning and reclamation alternatives and amounts to be recovered from other parties.

Cameco estimates total future decommissioning and reclamation costs for its existing operating assets to be $974,785,000 (2014 - $874,314,000). The expected timing of these outflows is based on life-of-mine plans with the majority of expenditures expected to occur after 2021. These estimates are reviewed by Cameco technical personnel as required by regulatory agencies or more frequently as circumstances warrant. In connection with future decommissioning and reclamation costs, Cameco has provided financial assurances of $1,010,784,000 (2014 - $910,902,000) in the form of letters of credit to satisfy current regulatory requirements.

The reclamation provision relates to the following segments:


	2015		2014
Uranium	$	741,561	$	682,769
Fuel services		175,473		145,246

Total	$	917,034	$	828,015

B.	Waste disposal

The Fuel Services division consists of the Blind River refinery, Port Hope conversion facility and Cameco Fuel Manufacturing Inc. The refining, conversion and manufacturing processes generate certain uranium contaminated waste. These include contaminated combustible material (paper, rags, gloves, etc.) and contaminated non-combustible material (metal parts, soil from excavations, building and roofing materials, spent uranium concentrate drums, etc.). These materials can in some instances be recycled or reprocessed. A provision for waste disposal costs in respect of these materials is recognized when they are generated.

Cameco estimates total future costs related to existing waste disposal to be $17,158,000 (2014 - $18,100,000). These outflows are expected to occur within the next three years.

120 CAMECO CORPORATION

18.

Share capital

Authorized share capital:

•

Unlimited number of first preferred shares

•

Unlimited number of second preferred shares

•

Unlimited number of voting common shares, no stated par value, and

•

One Class B share

A.	Common Shares


Number issued (number of shares)	2015		2014
Beginning of year		395,792,522		395,477,230

Issued:
Stock option plan [note 25]		—		315,292

Total		395,792,522		395,792,522

All issued shares are fully paid.

B.	Class B share

One Class B share issued during 1988 and assigned $1 of share capital entitles the shareholder to vote separately as a class in respect of any proposal to locate the head office of Cameco to a place not in the province of Saskatchewan.

C.	Dividends

Dividends on Cameco Corporation common shares are declared in Canadian dollars. For the year ended December 31, 2015, the dividend declared per share was $0.40 (December 31, 2014 - $0.40).

19.

Employee benefit expense

The following employee benefit expenses are included in cost of products and services sold, administration, exploration, research and development and property, plant and equipment:


	2015			2014
Wages and salaries	$	397,730		$	353,254
Statutory and company benefits		65,936			66,456
Equity-settled share-based compensation [note 25]		22,148			21,048
Expenses related to defined benefit plans [note 26]		5,003			7,605
Contributions to defined contribution plans [note 26]		17,961			17,274
Cash-settled share-based compensation [note 25]		(1,011	)		(1,616	)

Total	$	507,767		$	464,021

20.

Finance costs


	2015		2014
Interest on long-term debt	$	74,969	$	67,614
Unwinding of discount on provisions		21,428		20,671
Other charges		7,101		6,531
Loss on redemption of Series C debentures [note 15]		—		12,135
Interest on short-term debt		117		4,902

Total	$	103,615	$	111,853

No borrowing costs were determined to be eligible for capitalization during the year.

2015 Annual Report 121

21.

Other income (expense)


	2015			2014
Foreign exchange gains	$	59,323		$	34,731
Contract settlement		—			65,557
Contract termination fee		—			(18,304	)
Other		(4,600	)		3,338

Total	$	54,723		$	85,322

In 2014, Cameco recorded an early termination fee of $18,304,000, incurred as a result of the cancellation of our toll conversion agreement with Springfields Fuels Ltd., which was to expire in 2016.

In addition, Cameco recorded a gain with respect to a long-term supply contract with one of its utility customers. The $65,557,000 reflected as income from contract settlement related to deliveries that the customer refused to take in the years 2012 through 2017. This represented the full amount to be received in relation to this contract dispute.

22.

Income taxes

A.	Significant components of deferred tax assets and liabilities


	Recognized in earnings						As at December 31
	2015			2014			2015		2014
Assets
Provision for reclamation	$	1,572		$	75,732		$	253,821	$	251,045
Foreign exploration and development		(782	)		(807	)		5,322		6,103
Income tax losses		88,186			136,294			424,344		335,856
Defined benefit plan actuarial losses		—			—			5,184		5,813
Long-term investments and other		15,316			1,424			82,273		67,060

Deferred tax assets		104,292			212,643			770,944		665,877

Liabilities
Property, plant and equipment		(111,080	)		(1,334	)		69,875		182,841
Inventories		1,984			(15,719	)		22,574		20,590
Other		—			(3,102	)		—		—

Deferred tax liabilities		(109,096	)		(20,155	)		92,449		203,431

Net deferred tax asset	$	213,388		$	232,798		$	678,495	$	462,446


	2015			2014
Deferred tax allocated as
Deferred tax assets	$	713,674		$	486,328
Deferred tax liabilities		(35,179	)		(23,882	)

Net deferred tax asset	$	678,495		$	462,446

Based on projections of future income, realization of these deferred tax assets is probable and consequently a deferred tax asset has been recorded.

122 CAMECO CORPORATION

B.	Movement in net deferred tax assets and liabilities


	2015			2014
Net deferred tax asset at beginning of year	$	462,446		$	224,294
Recovery for the year in net earnings^(a)		213,388			246,558
Expense on discontinued operations		—			(13,761	)
Recovery (expense) for the year in comprehensive income		(669	)		3,171
Effect of movements in exchange rates		3,330			2,184

End of year	$	678,495		$	462,446

(a)	During the fourth quarter, we reversed amounts related to our deferred tax asset in the US totalling $72,600,000. We determined that it was no longer probable that there would be sufficient taxable profit in the future against which the operating losses and other tax deductions could be used.

C.	Significant components of unrecognized deferred tax assets


	2015		2014
Income tax losses	$	194,045	$	130,300
Property, plant and equipment		1,904		1,404
Provision for reclamation		25,952		—
Long-term investments and other		107,305		85,927

Total	$	329,206	$	217,631

D.	Tax rate reconciliation

The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial income tax rate to earnings before income taxes. The reasons for these differences are as follows:


	2015			2014
Loss from continuing operations before income taxes and non-controlling interest	$	(79,268	)	$	(119,098	)
Combined federal and provincial tax rate		26.9	%		26.9	%

Computed income tax recovery		(21,323	)		(32,037	)
Increase (decrease) in taxes resulting from:
Difference between Canadian rates and rates applicable to subsidiaries in other countries		(197,967	)		(225,368	)
Change in unrecognized deferred tax assets		111,575			76,009
Other taxes		2,172			3,430
Share-based compensation plans		1,528			2,094
Change in tax provision related to transfer pricing		(35,000	)		12,000
Non-deductible (non-taxable) capital amounts		(2,362	)		(8,108	)
Other permanent differences		(1,253	)		(3,288	)

Income tax recovery	$	(142,630	)	$	(175,268	)

2015 Annual Report 123

E.	Earnings and income taxes by jurisdiction


	2015			2014
Earnings (loss) from continuing operations before income taxes
Canada	$	(959,661	)	$	(840,705	)
Foreign		880,393			721,607

	$	(79,268	)	$	(119,098	)

Current income taxes (recovery)
Canada	$	14,617		$	(2,944	)
Foreign		56,141			74,234

	$	70,758		$	71,290
Deferred income taxes (recovery)
Canada	$	(291,363	)	$	(209,255	)
Foreign		77,975			(37,303	)

	$	(213,388	)	$	(246,558	)

Income tax recovery	$	(142,630	)	$	(175,268	)

F.	Reassessments

Canada

In 2008, as part of the ongoing annual audits of Cameco’s Canadian tax returns, Canada Revenue Agency (CRA) disputed the transfer pricing structure and methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd., in respect of sale and purchase agreements for uranium products. From December 2008 to date, CRA issued notices of reassessment for the taxation years 2003 through 2010, which in aggregate have increased Cameco’s income for Canadian tax purposes by approximately $3,400,000,000. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2009 in the amount of $229,000,000. Cameco believes it is likely that CRA will reassess Cameco’s tax returns for subsequent years on a similar basis and that these will require Cameco to make future remittances or provide security on receipt of the reassessments.

Using the methodology we believe that CRA will continue to apply and including the $3,400,000,000 already reassessed, we expect to receive notices of reassessment for a total of approximately $7,000,000,000 for the years 2003 through 2015, which would increase Cameco’s income for Canadian tax purposes and result in a related tax expense of approximately $2,100,000,000. In addition to penalties already imposed, CRA may continue to apply penalties to taxation years subsequent to 2009. As a result, we estimate that cash taxes and transfer pricing penalties would be between $1,650,000,000 and $1,700,000,000. In addition, we estimate there would be interest and instalment penalties applied that would be material to Cameco. While in dispute, we would be responsible for remitting or otherwise securing 50% of the cash taxes and transfer pricing penalties (between $825,000,000 and $850,000,000), plus related interest and instalment penalties assessed, which would be material to Cameco.

Under Canadian federal and provincial tax rules, the amount required to be remitted each year will depend on the amount of income reassessed in that year and the availability of elective deductions. Recently, the CRA disallowed the use of any loss carry-backs to be applied to any transfer pricing adjustment, starting with the 2008 tax year. In light of our view of the likely outcome of the case, we expect to recover the amounts remitted to CRA, including cash taxes, interest and penalties totalling $232,614,000 already paid as at December 31, 2015 (December 31, 2014 - $211,604,000) (note 11). In addition to the cash remitted, we have provided $332,000,000 in letters of credit to secure 50% of the cash taxes and related interest amounts reassessed in 2015.

124 CAMECO CORPORATION

The case on the 2003, 2005 and 2006 reassessments is expected to go to trial in the third quarter of 2016. If this timing is adhered to, we expect to have a Tax Court decision within six to 18 months after the trial is complete.

Having regard to advice from its external advisors, Cameco’s opinion is that CRA’s position is incorrect and Cameco is contesting CRA’s position and expects to recover any amounts remitted or secured as a result of the reassessments. However, to reflect the uncertainties of CRA’s appeals process and litigation, Cameco has recorded a cumulative tax provision related to this matter for the years 2003 through the current period in the amount of $50,000,000 (previously $92,000,000). We have reduced the provision to reflect management’s revised estimate which takes into account additional contract information. While the resolution of this matter may result in liabilities that are higher or lower than the reserve, management believes that the ultimate resolution will not be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution. Resolution of this matter as stipulated by CRA would be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution and other unfavourable outcomes for the years 2003 to date could be material to Cameco’s financial position, results of operations and cash flows in the year(s) of resolution.

Further to Cameco’s decision to contest CRA’s reassessments, Cameco is pursuing its appeal rights under Canadian federal and provincial tax rules.

United States

In 2015, we received Revenue Agent’s Reports (RARs) from the Internal Revenue Service (IRS) pertaining to the taxation years 2009, 2010 and 2011-2012, challenging the transfer pricing used under certain intercompany transactions. The RARs list the IRS’ proposed adjustments to taxable income and calculate the tax and penalties owing based on the proposed adjustments.

The proposed adjustments reflected in the RARs are focused on transfer pricing in respect of certain intercompany transactions within our corporate structure. The IRS asserts that a portion of the non-US income reported under our corporate structure and taxed outside the US should be recognized and taxed in the US. Having regard to advice from its external advisors, management believes that the conclusions of the IRS in the RARs are incorrect and is contesting them in an administrative appeal of the proposed adjustments. No cash payments are required while pursuing an administrative appeal. Management believes that the ultimate resolution of this matter will not be material to our financial position, results of operations or liquidity in the year(s) of resolution.

2015 Annual Report 125

G.	Income tax losses

At December 31, 2015, income tax losses carried forward of $2,177,332,000 (2014 - $1,632,194,000) are available to reduce taxable income. These losses expire as follows:


Date of expiry	Canada		US		Other		Total
2020	$	—	$	—	$	1,247	$	1,247
2028		94,702		—		—		94,702
2029		—		28,440		—		28,440
2030		—		1,661		—		1,661
2031		100,872		24,256		—		125,128
2032		234,093		23,938		—		258,031
2033		273,689		40,808		—		314,497
2034		280,382		22,511		—		302,893
2035		305,950		55,939		—		361,889
2036		—		—		—		—
2037		—		—		—		—
2038		—		—		—		—
2039		—		—		—		—
No expiry		—		—		688,844		688,844

	$	1,289,688	$	197,553	$	690,091	$	2,177,332

Included in the table above is $615,412,000 (2014 - $434,051,000) of temporary differences related to loss carry forwards where no future benefit is realized.

H.	Other comprehensive income

Other comprehensive income included on the consolidated statements of comprehensive income and the consolidated statements of changes in equity is presented net of income taxes. The following income tax amounts are included in each component of other comprehensive income:

For the year ended December 31, 2015


	Before tax		Income tax expense			Net of tax
Remeasurements of defined benefit liability	$	2,681	$	(666	)	$	2,015
Exchange differences on translation of foreign operations		182,089		—			182,089
Unrealized gains on available-for-sale assets		25		(3	)		22

	$	184,795	$	(669	)	$	184,126

126 CAMECO CORPORATION

For the year ended December 31, 2014


	Before tax			Income tax recovery (expense)			Net of tax
Remeasurements of defined benefit liability	$	(10,930	)	$	2,978		$	(7,952	)
Exchange differences on translation of foreign operations		58,890			—			58,890
Gains on derivatives designated as cash flow hedges transferred to net earnings - discontinued operation		(400	)		100			(300	)
Unrealized losses on available-for-sale assets		(707	)		94			(613	)
Losses on available-for-sale assets transferred to net earnings		3			(1	)		2

	$	46,856		$	3,171		$	50,027

23.

Per share amounts

Per share amounts have been calculated based on the weighted average number of common shares outstanding during the period. The weighted average number of paid shares outstanding in 2015 was 395,792,522 (2014 - 395,740,117).


	2015		2014
Basic earnings per share computation
Net earnings attributable to equity holders	$	65,286	$	185,234
Weighted average common shares outstanding		395,793		395,740

Basic earnings per common share	$	0.16	$	0.47

Diluted earnings per share computation
Net earnings attributable to equity holders	$	65,286	$	185,234
Weighted average common shares outstanding		395,793		395,740
Dilutive effect of stock options		—		315

Weighted average common shares outstanding, assuming dilution		395,793		396,055

Diluted earnings per common share	$	0.16	$	0.47

24.

Statements of cash flows


	2015			2014
Changes in non-cash working capital:
Accounts receivable	$	216,266		$	(18,063	)
Inventories		(238,549	)		12,690
Supplies and prepaid expenses		(46,620	)		50,522
Accounts payable and accrued liabilities		(12,225	)		(141,905	)
Reclamation payments		(11,807	)		(15,425	)
Amortization of purchase price allocation		16,005			23,339
Other		5,312			980

Other operating items	$	(71,618	)	$	(87,862	)

2015 Annual Report 127

25.

Share-based compensation plans

The Company has the following equity-settled plans:

A.	Stock option plan

The Company has established a stock option plan under which options to purchase common shares may be granted to employees of Cameco. Options granted under the stock option plan have an exercise price of not less than the closing price quoted on the Toronto Stock Exchange (TSX) for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options carry vesting periods of one to three years, and expire eight years from the date granted.

The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198 of which 27,870,079 shares have been issued.

Stock option transactions for the respective years were as follows:


(Number of options)	2015			2014
Beginning of year		8,353,006			9,817,443
Options granted		965,823			765,146
Options forfeited		(297,461	)		(218,102	)
Options expired		(518,130	)		(1,696,189	)
Options exercised [note 18]		—			(315,292	)

End of year		8,503,238			8,353,006

Exercisable		6,475,811			5,819,252

Weighted average exercise prices were as follows:


	2015		2014
Beginning of year	$	28.22	$	29.95
Options granted		19.30		26.81
Options forfeited		29.60		30.69
Options expired		46.48		38.93
Options exercised		—		19.75

End of year	$	26.04	$	28.22

Exercisable	$	27.34	$	30.39

Total options outstanding and exercisable at December 31, 2015 were as follows:


				Options outstanding				Options exercisable
Option price per share		Number		Weighted average remaining life		Weighted average exercisable price		Number		Weighted average exercisable price
$	19.30 - 34.99		6,761,748		4.6	$	22.63		4,734,321	$	22.94
$	35.00 - 54.38		1,741,490		2.1	$	39.29		1,741,490	$	39.29

			8,503,238						6,475,811

The foregoing options have expiry dates ranging from March 3, 2016 to March 1, 2023.

128 CAMECO CORPORATION

Non-vested stock option transactions for the respective years were as follows:


(Number of options)	2015			2014
Beginning of year		2,533,754			3,537,814
Options granted		965,823			765,146
Options forfeited		(17,320	)		(58,686	)
Options vested		(1,454,830	)		(1,710,520	)

End of year		2,027,427			2,533,754

B.	Executive performance share unit (PSU)

The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash at the board’s discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final value of the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting of PSUs at the end of the three-year period will be based on total shareholder return over the three years, Cameco’s ability to meet its annual operating targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period. As of December 31, 2015, the total number of PSUs held by the participants, after adjusting for forfeitures on retirement, was 791,071 (2014 - 620,654).

C.	Restricted share unit (RSU)

In 2011, the Company established an RSU plan whereby it provides each plan participant an annual grant of RSUs in an amount determined by the board. In 2014, Cameco expanded the scope of the RSU plan to include additional employees of the Company. Each RSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash, at the board’s discretion. The RSUs carry vesting periods of one to three years, and the final value of the units will be based on the value of Cameco common shares at the end of the vesting periods. As of December 31, 2015, the total number of RSUs held by the participants was 479,320 (2014 - 246,394).

D.	Employee share ownership plan

Cameco also has an employee share ownership plan, whereby both employee and Company contributions are used to purchase shares on the open market for employees. The Company’s contributions are expensed during the year of contribution. Under the plan, employees have the opportunity to participate in the program to a maximum of 6% of eligible earnings each year with Cameco matching the first 3% of employee-paid shares by 50%. Cameco contributes $1,000 of shares annually to each employee that is enrolled in the plan. Shares purchased with Company contributions and with dividends paid on such shares become unrestricted 12 months from the date on which such shares were purchased. At December 31, 2015, there were 3,659 participants in the plan (2014 - 3,704). The total number of shares purchased in 2015 with Company contributions was 309,251 (2014 - 280,765). In 2015, the Company’s contributions totalled $5,295,000 (2014 - $5,240,000).

2015 Annual Report 129

Cameco records compensation expense under its equity-settled plans with an offsetting credit to contributed surplus, to reflect the estimated fair value of units granted to employees. During the year, the Company recognized the following expenses under these plans:


	2015		2014
Stock option plan	$	5,610	$	7,802
Performance share unit plan		6,574		5,199
Restricted share unit plan		4,669		2,807
Employee share ownership plan		5,295		5,240

End of year	$	22,148	$	21,048

Fair value measurement of equity-settled plans

The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation and the fair value of options granted under the stock option plan was measured based on the Black-Scholes option-pricing model. The fair value of RSUs granted was determined based on their intrinsic value on the date of grant. Expected volatility was estimated by considering historic average share price volatility.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:


	Stock option plan			PSU			RSU
Number of options granted		965,823			336,602			298,662
Average strike price	$	19.30			—		$	18.89
Expected dividend	$	0.40			—			—
Expected volatility		32	%		29	%		—
Risk-free interest rate		0.7	%		0.5	%		—
Expected life of option		4.5 years			3 years			—
Expected forfeitures		7	%		5	%		7	%
Weighted average grant date fair values	$	4.30		$	18.88		$	18.89

In addition to these inputs, other features of the PSU grant were incorporated into the measurement of fair value. The market condition based on total shareholder return was incorporated by utilizing a Monte Carlo simulation. The non-market criteria relating to realized selling prices and operating targets have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.

The Company has the following cash-settled plans:

A.	Deferred share unit (DSU)

Cameco offers a DSU plan to non-employee directors. A DSU is a notional unit that reflects the market value of a single common share of Cameco. 60% of each director’s annual retainer is paid in DSUs. In addition, on an annual basis, directors can elect to receive 25%, 50%, 75% or 100% of the remaining 40% of their annual retainer and any additional fees in the form of DSUs. If a director meets their ownership requirements, the director may elect to take 25%, 50%, 75% or 100% of their annual retainer and any fees in cash, with the balance, if any, to be paid in DSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the board. The redemption amount will be based upon the weighted average of the closing prices of the common shares of Cameco on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of DSUs held by the director. As of December 31, 2015, the total number of DSUs held by participating directors was 623,534 (2014 - 542,391).

130 CAMECO CORPORATION

B.	Phantom stock option

Cameco makes annual grants of bonuses to eligible non-North American employees in the form of phantom stock options. Employees receive the equivalent value of shares in cash when exercised. Options granted under the phantom stock option plan have an award value equal to the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options vest over three years and expire eight years from the date granted. As of December 31, 2015, the number of options held by participating employees was 290,833 (2014 - 223,053) with exercise prices ranging from $19.30 to $39.53 per share (2014 - $19.37 to $46.88) and a weighted average exercise price of $26.05 (2014 - $28.81).

Cameco has recognized the following expenses under its cash-settled plans:


	2015			2014
Deferred share unit plan	$	(1,088	)	$	(1,493	)
Phantom stock option plan		77			(123	)

	$	(1,011	)	$	(1,616	)

At December 31, 2015, a liability of $11,063,000 (2014 - $10,675,000) was included in the consolidated statements of financial position to recognize accrued but unpaid expenses for cash-settled plans.

Fair value measurement of cash-settled plans

The fair value of the phantom stock option plan was measured based on the Black-Scholes option-pricing model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the phantom stock option plan at the grant and reporting dates were as follows:


	Grant date March 2, 2015			Reporting date December 31, 2015
Number of units		80,980			290,833
Average strike price	$	19.30		$	26.05
Expected dividend	$	0.40		$	0.40
Expected volatility		33	%		32	%
Risk-free interest rate		0.8	%		0.6	%
Expected life of option		4.6 years			3.4 years
Expected forfeitures		7	%		7	%
Weighted average measurement date fair values	$	4.04		$	1.76

26.

Pension and other post-retirement benefits

Cameco maintains both defined benefit and defined contribution plans providing pension benefits to substantially all of its employees. All regular and temporary employees participate in a registered defined contribution plan. This plan is registered under the Pension Benefits Standard Act, 1985. In addition, all Canadian-based executives participate in a non-registered supplemental executive pension plan which is a defined benefit plan.

2015 Annual Report 131

Under the supplemental executive pension plan (SEPP), Cameco provides a lump sum benefit equal to the present value of a lifetime pension benefit based on the executive’s length of service and final average earnings. The plan provides for unreduced benefits to be paid at the normal retirement age of 65, however unreduced benefits could be paid if the executive was at least 60 years of age and had 20 years of service at retirement. This program provides for a benefit determined by a formula based on earnings and service, reduced by the benefits payable under the registered base plan. Security is provided for the SEPP benefits through a letter of credit held by the plan’s trustee. The face amount of the letter of credit is determined each year based on the wind-up liabilities of the supplemental plan, less any plan assets currently held with the trustee. A valuation is required annually to determine the letter of credit amount. Benefits will continue to be paid from plan assets until the fund is exhausted, at which time Cameco will begin paying benefits from corporate assets.

Cameco also maintains non-pension post-retirement plans (“other benefit plans”) which are defined benefit plans that cover such benefits as group life insurance and supplemental health and dental coverage to eligible employees and their dependants. The costs related to these plans are charged to earnings in the period during which the employment services are rendered. These plans are funded by Cameco as benefit claims are made.

The board of directors of Cameco has final responsibility and accountability for the Cameco retirement programs. The board is ultimately responsible for managing the programs to comply with applicable legislation, providing oversight over the general functions and setting certain policies.

Cameco expects to pay $1,665,000 in contributions and letter of credit fees to its defined benefit plans in 2016.

The post-retirement plans expose Cameco to actuarial risks, such as longevity risk, market risk, interest rate risk, liquidity risk and foreign currency risk. The other benefit plans expose Cameco to risks of higher supplemental health and dental utilization than expected. However, the other benefit plans have limits on Cameco’s annual benefits payable.

The effective date of the most recent valuations for funding purposes on the registered defined benefit pension plans is January 1, 2015. The next planned effective date for valuations is January 1, 2018.

132 CAMECO CORPORATION

Cameco has more than one defined benefit plan and has generally provided aggregated disclosures in respect of these plans, on the basis that these plans are not exposed to materially different risks. Information relating to Cameco’s defined benefit plans is shown in the following table:


	Pension benefit plans						Other benefit plans
	2015			2014			2015			2014
Fair value of plan assets, beginning of year	$	10,877		$	15,402		$	—		$	—
Interest income on plan assets		406			717			—			—
Return on assets excluding interest income		1,960			188			—			—
Employer contributions		—			10			—			—
Benefits paid		(2,581	)		(5,420	)		—			—
Administrative costs paid		(30	)		(20	)		—			—

Fair value of plan assets, end of year	$	10,632		$	10,877		$	—		$	—

Defined benefit obligation, beginning of year	$	52,440		$	44,386		$	20,107		$	16,947
Current service cost		1,744			2,203			1,195			960
Interest cost		1,627			1,940			813			825
- demographic assumptions		—			971			38			106
- financial assumptions		(1,007	)		5,992			(1,228	)		2,037
- experience adjustment		(195	)		2,192			1,671			(180	)
Past service cost		—			2,374			—			—
Benefits paid		(3,175	)		(6,674	)		(825	)		(588	)
Foreign exchange		1,562			(944	)		—			—

Defined benefit obligation, end of year	$	52,996		$	52,440		$	21,771		$	20,107

Defined benefit liability [note 16]	$	(42,364	)	$	(41,563	)	$	(21,771	)	$	(20,107	)

The percentages of the total fair value of assets in the pension plans for each asset category at December 31 were as follows:


	Pension benefit plans
	2015			2014
Asset category^(a)
Canadian equity securities		8	%		7	%
Global equity securities		16	%		13	%
Canadian fixed income		25	%		21	%
Other^(b)		51	%		59	%

Total		100	%		100	%

(a)	The defined benefit plan assets contain no material amounts of related party assets at December 31, 2015 and 2014 respectively.

(b)	Relates to the value of the refundable tax account held by the Canada Revenue Agency. The refundable total is approximately equal to half of the sum of the realized investment income plus employer contributions less half of the benefits paid by the plan.

2015 Annual Report 133

The following represents the components of net pension and other benefit expense included primarily as part of administration:


	Pension benefit plans				Other benefit plans
	2015		2014		2015		2014
Current service cost	$	1,744	$	2,203	$	1,195	$	960
Net interest cost		1,221		1,223		813		825
Past service cost		—		2,374		—		—
Administration cost		30		20		—		—

Defined benefit expense [note 19]		2,995		5,820		2,008		1,785
Defined contribution pension expense [note 19]		17,961		17,274		—		—

Net pension and other benefit expense	$	20,956	$	23,094	$	2,008	$	1,785

The total amount of actuarial losses (gains) recognized in other comprehensive income is:


	Pension benefit plans						Other benefit plans
	2015			2014			2015		2014
Actuarial loss (gain)	$	(1,202	)	$	9,155		$	481	$	1,963
Return on plan assets excluding interest income		(1,960	)		(188	)		—		—

	$	(3,162	)	$	8,967		$	481	$	1,963

The assumptions used to determine the Company’s defined benefit obligation and net pension and other benefit expense were as follows at December 31 (expressed as weighted averages):


	Pension benefit plans						Other benefit plans
	2015			2014			2015			2014
Discount rate - obligation		3.9	%		3.4	%		4.0	%		3.9	%
Discount rate - expense		3.4	%		4.4	%		3.9	%		4.8	%
Rate of compensation increase		3.0	%		3.0	%		—			—
Initial health care cost trend rate		—			—			7.0	%		7.0	%
Cost trend rate declines to		—			—			5.0	%		5.0	%
Year the rate reaches its final level		—			—			2021			2018
Dental care cost trend rate		—			—			5.0	%		5.0	%

At December 31, 2015, the weighted average duration of the defined benefit obligation for the pension plans was 19.6 years (2014 - 20.3 years) and for the other benefit plans was 15.0 years (2014 - 14.0 years).

134 CAMECO CORPORATION

A 1% change at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the following:


	Pension benefit plans						Other benefit plans
	Increase			Decrease			Increase			Decrease
Discount rate	$	(6,449	)	$	8,412		$	(2,985	)	$	3,791
Rate of compensation increase		2,553			(2,307	)		n/a			n/a

A 1% change in any of the other assumptions would not have a significant impact on the defined benefit obligation.

The methods and assumptions used in preparing the sensitivity analyses are the same as the methods and assumptions used in determining the financial position of Cameco’s plans as at December 31, 2015. The sensitivity analyses are determined by varying the sensitivity assumption and leaving all other assumptions unchanged. Therefore, the sensitivity analyses do not recognize any interdependence in the assumptions. The methods and assumptions used in determining the above sensitivity are consistent with the methods and assumptions used in the previous year.

In addition, an increase of one year in the expected lifetime of plan participants in the pension benefit plans would increase the defined benefit obligation by $1,207,000.

To measure the longevity risk for these plans, the mortality rates were reduced such that the average life expectancy for all members increased by one year. The reduced mortality rates were subsequently used to re-measure the defined benefit obligation of the entire plan.

27.

Financial instruments and related risk management

Cameco is exposed in varying degrees to a variety of risks from its use of financial instruments. Management and the board of directors, both separately and together, discuss the principal risks of our businesses. The board sets policies for the implementation of systems to manage, monitor and mitigate identifiable risks. Cameco’s risk management objective in relation to these instruments is to protect and minimize volatility in cash flow. The types of risks Cameco is exposed to, the source of risk exposure and how each is managed is outlined below.

Market risk

Market risk is the risk that changes in market prices, such as commodity prices, foreign currency exchange rates and interest rates, will affect the Company’s earnings or the fair value of its financial instruments. Cameco engages in various business activities which expose the Company to market risk. As part of its overall risk management strategy, Cameco uses derivatives to manage some of its exposures to market risk that result from these activities.

Derivative instruments may include financial and physical forward contracts. Such contracts may be used to establish a fixed price for a commodity, an interest-bearing obligation or a cash flow denominated in a foreign currency. Market risks are monitored regularly against defined risk limits and tolerances.

Cameco’s actual exposure to these market risks is constantly changing as the Company’s portfolios of foreign currency, interest rate and commodity contracts change.

The types of market risk exposure and the way in which such exposure is managed are as follows:

A.	Commodity price risk

As a significant producer and supplier of uranium and nuclear fuel processing services, Cameco bears significant exposure to changes in prices for these products. A substantial change in prices will affect the Company’s net earnings and operating cash flows. Prices for Cameco’s products are volatile and are influenced by numerous factors beyond the Company’s control, such as supply and demand fundamentals and geopolitical events.

2015 Annual Report 135

Cameco’s sales contracting strategy focuses on reducing the volatility in future earnings and cash flow, while providing both protection against decreases in market price and retention of exposure to future market price increases. To mitigate the risks associated with the fluctuations in the market price for uranium products, Cameco seeks to maintain a portfolio of uranium product sales contracts with a variety of delivery dates and pricing mechanisms that provide a degree of protection from pricing volatility.

Cameco does not hold any significant financial instruments that expose the Company to material commodity price risk as of the reporting date.

B.	Foreign exchange risk

The relationship between the Canadian and US dollar affects financial results of the uranium business as well as the fuel services business. Sales of uranium product, conversion and fuel manufacturing services are routinely denominated in US dollars while production costs are largely denominated in Canadian dollars.

Cameco attempts to provide some protection against exchange rate fluctuations by planned hedging activity designed to smooth volatility. To mitigate risks associated with foreign currency, Cameco enters into forward sales and option contracts to establish a price for future delivery of the foreign currency. These foreign currency contracts are not designated as hedges and are recorded at fair value with changes in fair value recognized in earnings. Cameco also has a natural hedge against US currency fluctuations because a portion of its annual cash outlays, including purchases of uranium and conversion services, is denominated in US dollars.

Cameco holds a number of financial instruments denominated in foreign currencies that expose the Company to foreign exchange risk. Cameco measures its exposure to foreign exchange risk on financial instruments as the change in carrying values that would occur as a result of reasonably possible changes in foreign exchange rates, holding all other variables constant. As of the reporting date, the Company has determined its pre-tax exposure to foreign currency exchange risk on financial instruments to be as follows based on a 5% weakening of the Canadian dollar:


		Carrying value
	Currency	(Cdn)			Gain (loss)
Cash and cash equivalents	USD		123,089			6,154
Accounts receivable	USD		212,433			10,622
Long-term receivables, investments and other	USD		90,634			4,532
Accounts payable and accrued liabilities	USD		(127,111	)		(6,356	)
Net foreign currency derivatives	USD		(167,060	)		(87,746	)

A 5% strengthening of the Canadian dollar against the currencies above at December 31, 2015 would have had an equal but opposite effect on the amounts shown above, assuming all other variables remained constant.

C.	Interest rate risk

The Company has a strategy of minimizing its exposure to interest rate risk by maintaining target levels of fixed and variable rate borrowings. The proportions of outstanding debt carrying fixed and variable interest rates are reviewed by senior management to ensure that these levels are within approved policy limits. At December 31, 2015, the proportion of Cameco’s outstanding debt that carries fixed interest rates is 80% (2014 - 80%).

Cameco is exposed to interest rate risk through its interest rate swap contracts whereby fixed rate payments on a notional amount of $300,000,000 of the Series D senior unsecured debentures were swapped for variable rate payments. The swaps terminate on September 2, 2019. Under the terms of the swaps, Cameco makes interest payments based on the three-month Canada Dealer Offered Rate plus an average margin of 3.7% and receives fixed interest payments of 5.67%. At December 31, 2015, the fair value of Cameco’s interest rate swap assets was $10,783,000 (2014 - $2,978,000).

136 CAMECO CORPORATION

Cameco is also exposed to interest rate risk on its loan facility with Inkai and on NUKEM’s multicurrency revolving loan facility due to the variable nature of the interest rates contained in the terms therein.

Cameco measures its exposure to interest rate risk as the change in cash flows that would occur as a result of reasonably possible changes in interest rates, holding all other variables constant. As of the reporting date, the Company has determined the impact on earnings of a 1% increase in interest rate on variable rate financial instruments to be as follows:


	Gain (loss)
Interest rate contracts	$	(3,029	)
Advances receivable from Inkai		794

No amounts were drawn against NUKEM’s revolving loan facility as of December 31, 2015.

Counterparty credit risk

Counterparty credit risk is associated with the ability of counterparties to satisfy their contractual obligations to Cameco, including both payment and performance. Cameco’s sales of uranium product, conversion and fuel manufacturing services expose the Company to the risk of non-payment.

Cameco manages the risk of non-payment by monitoring the credit worthiness of its customers and seeking pre-payment or other forms of payment security from customers with an unacceptable level of credit risk. To mitigate risks associated with certain financial assets, Cameco will hold positions with a variety of large creditworthy institutions.

The maximum exposure to credit risk, as represented by the carrying amount of the financial assets, at December 31 was:


	2015		2014
Cash and cash equivalents	$	458,604	$	566,583
Accounts receivable		240,626		435,479
Advances receivable from Inkai [note 32]		87,188		91,672
Derivative assets		11,143		3,889
Other		3,446		—

At December 31, 2015, there were no significant concentrations of credit risk and no amounts were held as collateral. Historically, Cameco has experienced minimal customer defaults and, as a result, considers the credit quality of its accounts receivable to be high. All accounts receivable at the reporting date are neither past due nor impaired.

Cameco has established programs for sales without recourse of trade accounts receivable to financial institutions. Through these programs, the Company surrenders the control, risks and benefits associated with the accounts receivable sold. The amount of receivables sold is recorded as a sale of financial assets and the balances are removed from the consolidated statement of financial position at the time of sale. The total amount of receivables sold under these programs and derecognized in accordance with IAS 39 during 2015 was $201,992,000 ($152,410,000 (USD)) (2014 - $145,477,000 ($130,295,000 (USD)).

Liquidity risk

Financial liquidity represents Cameco’s ability to fund future operating activities and investments. Cameco ensures that there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company’s holdings of cash and cash equivalents. The Company believes that these sources will be sufficient to cover the likely short-term and long-term cash requirements.

2015 Annual Report 137

The table below outlines the Company’s available debt facilities at December 31, 2015:


			Outstanding and
	Total amount		committed		Amount available
Unsecured revolving credit facility	$	1,250,000	$	—	$	1,250,000
Letter of credit facilities		1,490,809		1,384,061		106,748
NUKEM multicurrency revolving loan facility		112,718		562		112,156

The tables below present a maturity analysis of Cameco’s financial liabilities, including principal and interest, based on the expected cash flows from the reporting date to the contractual maturity date:


	Carrying amount		Contractual cash flows		Due in less than 1 year		Due in 1-3 years		Due in 3-5 years		Due after 5 years
Accounts payable and accrued liabilities	$	317,856	$	317,856	$	317,856	$	—	$	—	$	—
Dividends payable		39,579		39,579		39,579		—		—		—
Long-term debt		1,492,237		1,500,000		—		—		500,000		1,000,000
Foreign currency contracts		167,420		167,420		167,420		—		—		—
Other derivative liabilities		816		816		816		—		—		—

Total contractual repayments	$	2,017,908	$	2,025,671	$	525,671	$	—	$	500,000	$	1,000,000


	Total		Due in less than 1 year		Due in 1-3 years		Due in 3-5 years		Due after 5 years
Total interest payments on long-term debt	$	544,380	$	69,390	$	138,780	$	110,430	$	225,780

Measurement of fair values

A.	Accounting classifications and fair values

The following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the reporting date:

138 CAMECO CORPORATION

At December 31, 2015


	Fair value through profit or loss			Loans and receivables		Available for sale		Other financial liabilities			Total
Financial assets
Cash and cash equivalents	$	—		$	458,604	$	—	$	—		$	458,604
Accounts receivable [note 7]		—			246,865		—		—			246,865
Derivative assets [note 11]
Foreign currency contracts		360			—		—		—			360
Interest rate contracts		10,783			—		—		—			10,783
Investments in equity securities [note 11]		—			—		938		—			938
Advances receivable from Inkai [note 32]		—			87,188		—		—			87,188
Other		—			3,446		—		—			3,446

	$	11,143		$	796,103	$	938	$	—		$	808,184

Financial liabilities
Accounts payable and accrued liabilities [note 13]	$	—		$	—	$	—	$	317,856		$	317,856
Dividends payable		—			—		—		39,579			39,579
Derivative liabilities [note 16]
Foreign currency contracts		167,420			—		—		—			167,420
Other		816			—		—		—			816
Long-term debt [note 15]		—			—		—		1,492,237			1,492,237

		168,236			—		—		1,849,672			2,017,908

Net	$	(157,093	)	$	796,103	$	938	$	(1,849,672	)	$	(1,209,724	)

At December 31, 2014


	Fair value through profit or loss			Loans and receivables		Available for sale		Other financial liabilities			Total
Financial assets
Cash and cash equivalents	$	—		$	566,583	$	—	$	—		$	566,583
Accounts receivable [note 7]		—			455,002		—		—			455,002
Derivative assets [note 11]
Foreign currency contracts		911			—		—		—			911
Interest rate contracts		2,978			—		—		—			2,978
Investments in equity securities [note 11]		—			—		6,601		—			6,601
Advances receivable from Inkai [note 32]		—			91,672		—		—			91,672

	$	3,889		$	1,113,257	$	6,601	$	—		$	1,123,747

Financial liabilities
Accounts payable and accrued liabilities [note 13]	$	—		$	—	$	—	$	316,258		$	316,258
Dividends payable		—			—		—		39,579			39,579
Derivative liabilities [note 16]
Foreign currency contracts		67,916			—		—		—			67,916
Long-term debt [note 15]		—			—		—		1,491,198			1,491,198

		67,916			—		—		1,847,035			1,914,951

Net	$	(64,027	)	$	1,113,257	$	6,601	$	(1,847,035	)	$	(791,204	)

Cameco does not have any financial instruments classified as held-for-trading, or held-to-maturity as of the reporting date.

2015 Annual Report 139

The following tables summarize the carrying amounts and fair values of Cameco’s financial instruments that are measured at fair value, including their levels in the fair value hierarchy:

As at December 31, 2015


				Fair value
	Carrying value			Level 1		Level 2			Total
Derivative assets [note 11]
Foreign currency contracts	$	360		$	—	$	360		$	360
Interest rate contracts		10,783			—		10,783			10,783
Investments in equity securities [note 11]		938			938		—			938
Derivative liabilities [note 16]
Foreign currency contracts		(167,420	)		—		(167,420	)		(167,420	)
Other		(816	)		—		(816	)		(816	)
Long-term debt [note 15]		(1,492,237	)		—		(1,786,567	)		(1,786,567	)

Net	$	(1,648,392	)	$	938	$	(1,943,660	)	$	(1,942,722	)

As at December 31, 2014


				Fair value
	Carrying value			Level 1		Level 2			Total
Derivative assets [note 11]
Foreign currency contracts	$	911		$	—	$	911		$	911
Interest rate contracts		2,978			—		2,978			2,978
Investments in equity securities [note 11]		6,601			6,601		—			6,601
Derivative liabilities [note 16]
Foreign currency contracts		(67,916	)		—		(67,916	)		(67,916	)
Long-term debt [note 15]		(1,491,198	)		—		(1,765,178	)		(1,765,178	)

Net	$	(1,548,624	)	$	6,601	$	(1,829,205	)	$	(1,822,604	)

The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable approximation of fair value.

There were no transfers between level 1 and level 2 during the period. Cameco does not have any financial instruments that are classified as level 3 as of the reporting date.

B.	Financial instruments measured at fair value

Cameco measures its derivative financial instruments, material investments in equity securities and long-term debt at fair value. Investments in publicly held equity securities are classified as a recurring level 1 fair value measurement while derivative financial instruments and long-term debt are classified as a recurring level 2 fair value measurement.

The fair value of investments in equity securities is determined using quoted share prices observed in the principal market for the securities as of the reporting date. The fair value of Cameco’s long-term debt is determined using quoted market yields as of the reporting date, which ranged from 0.6% to 2.2% (2014 - 1.2% to 2.3%).

Foreign currency derivatives consist of foreign currency forward contracts, options and swaps. The fair value of foreign currency options is measured based on the Black Scholes option-pricing model. The fair value of foreign currency forward contracts and swaps is measured using a market approach, based on the difference between contracted foreign exchange rates and quoted forward exchange rates as of the reporting date.

140 CAMECO CORPORATION

Interest rate derivatives consist of interest rate swap contracts. The fair value of interest rate swaps is determined by discounting expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between fixed interest payments to be received and floating interest payments to be made to the counterparty based on Canada Dealer Offer Rate forward interest rate curves.

Where applicable, the fair value of the derivatives reflects the credit risk of the instrument and includes adjustments to take into account the credit risk of the Company and counterparty. These adjustments are based on credit ratings and yield curves observed in active markets at the reporting date.

C.	Financial instruments not measured at fair value

The carrying value of Cameco’s cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximates its fair value as a result of the short-term nature of the instruments.

Derivatives

The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:


	2015			2014
Non-hedge derivatives:
Foreign currency contracts	$	(167,060	)	$	(67,005	)
Interest rate contracts		10,783			2,978
Other		(816	)		—

Net	$	(157,093	)	$	(64,027	)

Classification:
Current portion of long-term receivables, investments and other [note 11]	$	3,823		$	500
Long-term receivables, investments and other [note 11]		7,320			3,389
Current portion of other liabilities [note 16]		(168,236	)		(53,873	)
Other liabilities [note 16]		—			(14,043	)

Net	$	(157,093	)	$	(64,027	)

The following table summarizes the different components of the losses on derivatives included in net earnings:



	2015			2014
Non-hedge derivatives:
Foreign currency contracts	$	(292,039	)	$	(126,069	)
Interest rate contracts		10,708			4,893
Other		721			16

Net	$	(280,610	)	$	(121,160	)

28.

Capital management

Cameco’s capital structure reflects our vision and the environment in which we operate. We seek growth through development and expansion of existing assets by acquisition. Our capital resources are managed to support achievement of our goals. The overall objectives for managing capital in 2015 remained unchanged from the prior comparative period.

Cameco’s management considers its capital structure to consist of bank overdrafts, long-term debt, short-term debt (net of cash and cash equivalents and short-term investments), non-controlling interest and shareholders’ equity.

2015 Annual Report 141

The capital structure at December 31 was as follows:


	2015			2014
Long-term debt [note 15]	$	1,492,237		$	1,491,198
Cash and cash equivalents		(458,604	)		(566,583	)

Net debt		1,033,633			924,615

Non-controlling interest		(1,741	)		160
Shareholders’ equity		5,547,020			5,443,644

Total equity		5,545,279			5,443,804

Total capital	$	6,578,912		$	6,368,419

Cameco is bound by certain covenants in its general credit facilities. These covenants place restrictions on total debt, including guarantees and set minimum levels for net worth. As of December 31, 2015, Cameco met these requirements.

The terms of NUKEM’s revolving loan facility contain a financial covenant that places restrictions on total debt and working capital balances. The facility also requires Cameco, as guarantor, to maintain a minimum credit rating. As of December 31, 2015 the Company is in compliance with all requirements under this facility.

29.

Segmented information

Cameco has three reportable segments: uranium, fuel services and NUKEM. The uranium segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate. The fuel services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion services. The NUKEM segment acts as a market intermediary between uranium producers and nuclear-electric utilities.

Cameco’s reportable segments are strategic business units with different products, processes and marketing strategies.

Accounting policies used in each segment are consistent with the policies outlined in the summary of significant accounting policies. Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced on an arm’s length basis, are eliminated on consolidation and are reflected in the “other” column.

142 CAMECO CORPORATION

A.	Business segments - 2015

For the year ended December 31, 2015


	Uranium		Fuel services		NUKEM			Other			Total
Revenue	$	1,866,198	$	318,999	$	553,665		$	15,516		$	2,754,378

Expenses
Cost of products and services sold		989,239		226,854		516,880			11,842			1,744,815
Depreciation and amortization		269,084		30,670		(5,103	)		17,867			312,518

Cost of sales		1,258,323		257,524		511,777			29,709			2,057,333

Gross profit (loss)		607,875		61,475		41,888			(14,193	)		697,045

Administration		—		—		18,130			168,680			186,810
Impairment charges		215,488		—		—			—			215,488
Exploration		40,259		—		—			—			40,259
Research and development		—		—		—			6,587			6,587
Loss on disposal of assets		1,753		564		9			—			2,326
Finance costs		—		—		4,593			99,022			103,615
Loss (gain) on derivatives		—		—		(587	)		281,197			280,610
Finance income		—		—		(3	)		(5,414	)		(5,417	)
Share of loss from equity-accounted investees		758		—		—			—			758
Other expense (income)		4,600		—		1,899			(61,222	)		(54,723	)

Earnings (loss) before income taxes		345,017		60,911		17,847			(503,043	)		(79,268	)
Income tax recovery												(142,630	)

Net earnings												63,362

Capital expenditures for the year	$	344,610	$	13,952	$	—		$	—		$	358,562

2015 Annual Report 143

For the year ended December 31, 2014


	Uranium			Fuel services			NUKEM			Other			Total
Revenue	$	1,777,180		$	306,235		$	349,245		$	(35,128	)	$	2,397,532

Expenses
Cost of products and services sold		902,813			237,872			319,369			(39,286	)		1,420,768
Depreciation and amortization		272,632			30,038			7,584			28,729			338,983

Cost of sales		1,175,445			267,910			326,953			(10,557	)		1,759,751

Gross profit (loss)		601,735			38,325			22,292			(24,571	)		637,781

Administration		—			—			16,591			159,794			176,385
Impairment charges		143,078			183,615			—			—			326,693
Exploration		46,565			—			—			—			46,565
Research and development		—			—			—			5,044			5,044
Gain (loss) on disposal of assets		32,959			11,808			(5	)		—			44,762
Finance costs		—			—			4,428			107,425			111,853
Loss on derivatives		—			—			1,799			119,361			121,160
Finance income		—			—			(14	)		(7,388	)		(7,402	)
Share of loss from equity-accounted investees		3,874			13,267			—			—			17,141
Other expense (income)		(68,626	)		18,035			(659	)		(34,072	)		(85,322	)

Earnings (loss) before income taxes		443,885			(188,400	)		152			(374,735	)		(119,098	)
Income tax recovery														(175,268	)

Net earnings from continuing operations														56,170

Capital expenditures for the year	$	466,332		$	13,776		$	—		$	—		$	480,108

B.	Geographic segments

Revenue is attributed to the geographic location based on the location of the entity providing the services. The Company’s revenue from external customers is as follows:


	2015		2014
United States	$	2,135,977	$	1,914,583
Canada		341,568		308,327
Germany		276,833		174,622

	$	2,754,378	$	2,397,532

The Company’s non-current assets, excluding deferred tax assets and financial instruments, by geographic location are as follows:


	2015		2014
Canada	$	3,867,740	$	4,048,009
Australia		684,261		643,986
United States		429,815		409,495
Other		327,847		274,527
Germany		135,627		116,106

	$	5,445,290	$	5,492,123

144 CAMECO CORPORATION

C.	Major customers

Cameco relies on a small number of customers to purchase a significant portion of its uranium concentrates and uranium conversion services. During 2015, revenues from one customer of Cameco’s uranium, fuel services and NUKEM segments represented approximately $320,312,000 (2014 - $281,485,000), approximately 12% (2014 - 12%) of Cameco’s total revenues from these segments. As customers are relatively few in number, accounts receivable from any individual customer may periodically exceed 10% of accounts receivable depending on delivery schedule.

30.

Group entities

The following are the principal subsidiaries and associates of the Company:


	Principal place	Ownership interest
	of business	2015			2014
Subsidiaries:
Cameco Fuel Manufacturing Inc.	Canada		100	%		100	%
Cameco Inc.	US		100	%		100	%
Power Resources, Inc.	US		100	%		100	%
Crow Butte Resources, Inc.	US		100	%		100	%
NUKEM Investments GmbH	Germany		100	%		100	%
Cameco Australia Pty. Ltd.	Australia		100	%		100	%
Cameco Europe Ltd.	Switzerland		100	%		100	%

Associates
GE-Hitachi Global Laser Enrichment LLC	US		24.00	%		24.00	%
UEX Corporation	Canada		20.33	%		21.28	%

31.

Joint operations

Cameco conducts a portion of its exploration, development, mining and milling activities through joint operations located around the world. Operations are governed by agreements that provide for joint control of the strategic operating, investing and financing activities among the partners. These agreements were considered in the determination of joint control. Cameco’s significant Canadian uranium joint operation interests are McArthur River, Key Lake and Cigar Lake. The Canadian uranium joint operations allocate uranium production to each joint operation participant and the joint operation participant derives revenue directly from the sale of such product. The participants in the Inkai joint operation purchase uranium from Inkai and, in turn, derive revenue directly from the sale of such product to third-party customers. Mining and milling expenses incurred by joint operations are included in the cost of inventory.

2015 Annual Report 145

Cameco reflects its proportionate interest in these assets and liabilities as follows:


	Principal place of business	Ownership			2015		2014
Total assets
McArthur River	Canada		69.81	%	$	1,107,017	$	1,074,501
Key Lake	Canada		83.33	%		629,075		645,186
Cigar Lake	Canada		50.03	%		1,674,805		1,617,101
Inkai	Kazakhstan		60.00	%		436,611		359,554

					$	3,847,508	$	3,696,342

Total liabilities
McArthur River			69.81	%	$	49,986	$	54,170
Key Lake			83.33	%		174,654		181,443
Cigar Lake			50.03	%		39,201		52,580
Inkai			60.00	%		176,163		171,198

					$	440,004	$	459,391

Through unsecured shareholder loans, Cameco has agreed to fund the development of the Inkai project. Cameco eliminates the loan balances recorded by Inkai and records advances receivable (notes 11 and 32) representing its 40% share.

32.

Related parties

The shares of Cameco are widely held and no shareholder, resident in Canada, is allowed to own more than 25% of the Company’s outstanding common shares, either individually or together with associates. A non-resident of Canada is not allowed to own more than 15%.

Transactions with key management personnel

Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel of the Company include executive officers, vice-presidents, other senior managers and members of the board of directors.

In addition to their salaries, Cameco also provides non-cash benefits to executive officers and vice-presidents and contributes to pension plans on their behalf (note 26). Senior management and directors also participate in the Company’s share-based compensation plans (note 25).

Executive officers are subject to terms of notice ranging from three to six months. Upon resignation at the Company’s request, they are entitled to termination benefits up to the lesser of 24 months or the period remaining until age 65. The termination benefits include gross salary plus the target short-term incentive bonus for the year in which termination occurs.

Compensation for key management personnel was comprised of:


	2015		2014
Short-term employee benefits	$	20,271	$	19,922
Post-employment benefits		5,787		8,395
Share-based compensation^(a)		12,749		11,306

	$	38,807	$	39,623

(a)	Excludes deferred share units held by directors (see note 25).

146 CAMECO CORPORATION

Other related party transactions

Through unsecured shareholder loans, Cameco has agreed to fund Inkai’s project development costs as well as further evaluation on block 3. The limits of the loan facilities are $189,218,000 (US) and advances under these facilities bear interest at a rate of LIBOR plus 2%. At December 31, 2015, $157,492,000 (US) of principal and interest was outstanding (2014 - $197,551,000 (US)).

Cameco’s share of outstanding principal and interest was $87,188,000 at December 31, 2015 (2014 - $91,672,000) (note 11). For the year ended December 31, 2015, Cameco recorded interest income of $2,007,000 relating to this balance (2014 - $2,038,000).

2015 Annual Report 147

LOGO

Dividend Policy
The board of directors has established
a policy of paying a quarterly
dividend of $0.10 ($0.40 per year)
per common share. This policy will be
reviewed from time to time in light of
the company’s cash flow, earnings,
financial position and other relevant
factors.
Inquiries
Cameco Corporation
2121 – 11th Street West
Saskatoon, Saskatchewan S7M 1J3
Phone: 306-956-6200
Fax: 306-956-6201
For comprehensive financial
information visit:
cameco.com
Investor information
Common Shares
Toronto (CCO) | New York (CCJ)
Transfer Agents and Registrars
The registrar and transfer agent for
Cameco’s common shares is CST
Trust Company. For information on
common shareholdings, dividend
cheques, lost share certificates and
address changes, contact:
In Canada
CST Trust Company
P.O. Box 700, Station B
Montreal, Quebec
H3B 3K3
In the United States
American Stock Transfer & Trust
Company, LLC
Attention: General Counsel
6201 15th Avenue
Brooklyn, NY
11219
Telephone
1-800-387-0825 OR
1-416-682-3860 outside
of North America
www.canstockta.com
Annual Meeting
The annual meeting of shareholders
of Cameco Corporation is scheduled
to be held on Wednesday, May 11,
2016 at Cameco’s head office
in Saskatoon, Saskatchewan.

LOGO

Cameco is on track
to respond when the market
calls for new production
cameco.com